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Business Barometers 

used in the 

Accumulation of Money 



Jl Text Book on Jlpplied Economics 
for Merchants, Bankers 
and Investors 
1 RQ 

_L $i v/ 
By 

Roger W. Babson 

Vice-President of the 
Gloucester (Mass.) Safe Deposit and Trust Company 



(FIFTH EDITION) 
Issued January, 1912 

(1911 annual figures are in some cases estimated) 

Published by 
BABSON'S STATISTICAL ORGANIZATION 

(Incorporated) 

Wellesley Hills, Mass. 

U. S. A. 



13 *^£» 



First Edition Copyrighted 1 909 
Second Edition Copyrighted 1910 
Third Edition Copyrighted 1910 
Fourth Edition Copyrighted 1911 
Fifth Edition Copyrighted 1912 
by 
Roger W. Babson 



4 CI. A 30 D 3 1)3 



Dedicated 
to 

GEORGE FILMORE SWAIN 

Professor of Civil Engineering 
Harvard University 



"People will endeavor to forecast the future and make agreements 
according to their prophecy. Speculation of this kind by competent men 
is the self-adjustment of society to the probability." — Judge Holmes in a 
United States Supreme Court decision. 



11 1 hold that a man who is long-headed, who foresees 
and judges accurately, has an advantage over his 
neighbor, and it is not accounted immoral for him to 
use that advantage, because he is individually better 
fitted for the business; and it inheres in him by a law 
of nature, that he has a right to the whole of himself 
legitimately applied. If one man, or twenty men, 
looking at the state of the nation here, at the crops, 
at the possible contingencies and risks of climate, at 
the conditions of Europe; in other words, taking all 
the elements that belong to the world, into consider- 
ation, are sagacious enough to prophecy the best of 
action, I don't see why it is not legitimate.'' 1 

Henry Ward Beecher. 



TABLE OF CONTENTS 



Page 

CHAPTER I. 
Two Classes of Statistics 13 

CHAPTER II. 

Range of Stock Market Since 1860, Showing the 

Possibilities of Profit to an Investor ... 30 

CHAPTER III. 

Range of Commodity Market Since 1860, Showing 

the Possibilities of Profit to a Merchant . . 77 

CHAPTER IV. 
The Theory of Fundamental Statistics ... 98 

CHAPTER V. 

Conditions and Events Since 1860 . . . . 120 

CHAPTER VI. 

Subjects Relating Especially to Mercantile Conditions 180 

CHAPTER VII. 
Subjects Relating Especially to Monetary Conditions 218 

CHAPTER VIII. 

Subjects Relating Especially to Investment Conditions 318 

CHAPTER IX. 
A Talk on Coppers 367 

CHARTS. 

1. Chart Showing the Range of the Stock Market 

Since 1874 30 

2. Chart Showing the Range of the Commodity 

Market Since 1860 76 

3. Composite Chart Based on Twelve Leading Subjects 98 

4. Chart of Course of Money Following Four Great 

Panics 236 

5. Course of Stock Market in Four Panics . . 258 



FOREWORD 

"A study of past disturbances leads to the conviction 
that no severe depression has occurred which was not 
preceded by loud warnings. These, warnings ought 
not to pass unheeded and in order to recognize them 
promptly, it is necessary that accurate statistics be 
furnished. Much improvement has been accomplished 
in the last few years, though it is to be regretted that 
so much of our statistical information is fragmen- 
tary or inaccurate. Official and private publications 
furnish much valuable information. They include 
voluminous figures of deposits and loans of banks, 
movement of specie, exports and imports, railway 
earnings, wholesale prices, and the condition and 
probable yield of crops. A vital defect in many of 
them is the omission to give, for purposes of compari- 
son, similar figures for previous months and years. 
Another defect is the absence of uniformity in the 
methods and classification employed. These compara- 
tive statistics would afford a means of determining the 
trend of events, and give warning when prices are un- 
naturally high or any branch of business is overdone. 
It is also noteworthy that we do not sufficiently con- 
sider statistics relating to the course of affairs in for- 
eign countries, the influence of which upon our own 
condition is of the utmost importance, by reason of 
the enlargement of our trade and the closer interna- 
tional relations of modern commerce. Other statistics, 
which are inadequate or lacking and which would be 



of great value, are those pertaining to the employment 
of labor, capital invested in new enterprises, amounts 
expended in new construction, volume of production 
in the various kinds of manufactures, and statistics 
of state banks and savings institutions similar to those 
pertaining to national banks. After making due al- 
lowance for the insufficiency of statistics, it must be 
said that the failure to pay sufficient attention to those 
already available is equally to be regretted." 

The above was written in 1902 by Hon. Theodore 
E. Burton, U. S. Senator from Ohio, and is very 
interesting as a matter of prophecy. The "vital de- 
fects" mentioned have, however, now been overcome, 
and the office of the author of this book has obtained 
and is now able to furnish regularly the identical 
figures which Senator Burton then so much desired. 



PREFACE 

(Fundamental Principles which readers of this book should 
always keep in mind.) 

NEITHER this book nor any other can aid a 
banker, merchant or investor to become 
rich within a short time. Nobody knows 
nor can know what conditions or prices are to exist 
within a few weeks or even months, and 95% of 
the men who endeavor to take advantage of these 
monthly movements — or even who worry about 
them — never make much headway. 

Great fortunes, which have been created by 
bankers, merchants and investors, are the result 
of ignoring these monthly fluctuations in com- 
modity and security prices, and of striving to antici- 
pate and profit by the major movements coming 
every few years. These major movements can be 
foretold if one will spend the necessary time and 
money in studying fundamental conditions. There- 
fore, a fortune is within the grasp of every reader of 
this book who has and uses the necessary figures. 
There are, however, two requisites: 

1. One must develop self-control, both to re- 
frain from attempting to profit by the monthly 
fluctuations, which 95% of the people endeavor to 
follow, and to act quickly and take advantage of 
the major movements, which 95% of the people 
fail to profit by, either because they are infatuated 
with prosperity or scared by panic or depression. 

2. One must develop patience, and remember 
that it takes years to build up a fortune in this 
way, that it is an especially slow process at first, so 



that what we spend for obtaining the data the first 
few years may seem large during these early years. 
The expense, however, is infinitesimal compared 
with the value. In truth, it is due to the fact that 
most people ignore these figures that 90% of our 
business men are said to "fail." 

Some ask, are not students of fundamental con- 
ditions working to their own disadvantage in urging 
others to unite in this work? My answer is "theo- 
retically — yes." On the other hand, every honest 
preacher, physician, lawyer, teacher, judge and 
soldier who is truly serving his function in the 
community, must strive to eliminate the trouble, 
upon the existence of which he is dependent for a 
livelihood. But, until the world no longer needs 
preachers, physicians, lawyers, judges and soldiers, 
there will be periods of prosperity and depression 
when commodities and securities will rise and 
decline in price, and we who study fundamental 
conditions and act in accordance with what they teach, 
both perform a distinct service to our country and 
slowly, but surely, create for our institutions and 
ourselves huge fortunes. 

The writer of this book wishes to acknowledge 
the aid which he has received from many friends 
in this country and abroad. He wishes also to 
thank his efficient corps of assistants who have 
aided greatly in the compilation, and commends 
the various books, papers and periodicals which he 
has quoted from or used in other ways. 

He also wishes again to thank his many friends in 
the various Stock Exchange Firms, Bond Houses, 
and Banks who have been patient during the ex- 
perimental and formulative stages of this work. 



These friends have not only recognized the difficul- 
ties under which the work has been performed, but 
have always aided greatly by criticisms and sug- 
gestions. May the writer never abuse this friend- 
ship. 

In order to keep this book reasonably up to date, 
no new figures need hereafter be added to the tables in 
the body of the book, but may be supplied through the 
Addenda {or the large sheet forming a part thereof) 
which can be revised any week. These Addenda may 
be found in the latter part of this book. 

R. W. B. 



Wellesley Hills, Mass., January, 1912. 



CHAPTER I 

TWO CLASSES OF STATISTICS 

STATISTICS are divided into two classes, viz. : 
Comparative Statistics and Fundamental Sta- 
tistics; and the following gives a short de- 
scription of these two classes: 

(1) Comparative Statistics 
So far as the merchant is concerned, comparative 
statistics relate to the weight, quality, age and 
method of manufacture of the merchandise in which 
he deals, together with such " trade figures" as are 
published in the trade journals. 

From the investor's point of view, comparative 
statistics include all particulars concerning the 
bonded debt, the earnings, and the general physical 
and financial condition of properties. Such statis- 
tics are very necessary to bankers and investors for 
comparing similar securities of different companies, 
or different securities of the same company. If 
such data is always up to date, such comparative 
statistics are very valuable for enabling one to se- 
lect safe securities, either for permanent investment 
or for buying and selling again. As the largest and 
most successful stock exchange brokers, bond houses 
and mercantile firms are already well supplied 
with comparative statistics and, so far as they are 
useful, are obtaining excellent results from them, 



14 BUSINESS BAROMETERS 

we shall not here discuss details concerning this 
class. It should be clearly understood, however, 
that such statistics are worthless for determining 
the general course of the entire market. 

Comparative statistics determine only actual 
values, enabling one to select safe securities, or 
good merchandise, or to select -the better of two 
or more companies' securities or grades of mer- 
chandise. With the general market conditions 
remaining fixed, comparative statistics might be 
used for forecasting a rise or a decline; but the 
general market is so seldom stable, that compara- 
tive statistics cannot be depended upon to serve 
this purpose. It is this fact, that they are inade- 
quate for analyzing general conditions, that has 
brought comparative statistics into ill-repute. The 
market value of securities or merchandise may con- 
tinually decline, and the actual value of the same 
increase, or vice versa. 

Whoever bases either purchases or sales upon 
earnings, physical conditions or other comparative 
statistics with the idea of selling at a profit, will 
surely lose money. Note the phrase "with the 
idea of selling at a profit." Such statistics may be 
used for selecting a safe investment, or good mer- 
chandise, such as one may desire to hold perma- 
nently or possibly for a "long pull"; but they are 
absolutely worthless for "short terms." It is be- 
cause this fact is not being recognized by many 
firms, content with accumulating only comparative 
statistics, that even with their elaborate statistical 
departments they are often on the losing side. In 



TWO CLASSES OF STATISTICS 15 

short, comparative statistics treat only of surface 
conditions. 

(2) Fundamental Statistics 

Fundamental statistics relate to underlying 
conditions of the country and make it possible to 
forecast demand, supply, money conditions, etc. 
Fundamental statistics, although now used by 
only the most careful investors and merchants, are 
by far the most necessary and profitable. 

It is the purpose of this book to show the impor- 
tance of considering underlying and fundamental 
conditions before buying or selling securities or mer- 
chandise. 

All financial history has consisted of distinct 
cycles, and although of different durations, each 
cycle has consisted of four distinct periods, namely: 

1. A Period of Prosperity. 

2. A Period of Decline. 

3. A Period of Depression. 

4. A Period of Improvement. 

Moreover, the laws of nature, commerce and in- 
dustry determine that these cycles shall always con- 
sist of four distinct periods. The idea that reckless 
prosperity can ever become permanent and will 
not be followed by a business depression, or the 
idea that there can be an unlimited period of de- 
pression without succeeding general activity and 
high market prices, shows both ignorance of eco- 
nomics and utter inexperience in the business world. 

On the other hand, there are major cycles of 



16 BUSINESS BAROMETERS 

about twenty years' duration, and also minor cycles 
of about five years' duration. 

Theoretically, there should be a state where 
everybody is prosperous and nobody over-trades, 
where the cost of living is reasonable, and the wage- 
earner has a margin to save for old age or establish 
a higher standard of comfort. Yet it is true that 
we have never so far seen a condition so equable. 

The record of crises and booms can be carried 
back beyond the history of this country, and we can 
start from the opening years of the eighteenth cen- 
tury when William of Orange was on the English 
throne. We can trace therefrom a commercial 
cycle once in five to twenty years, and we can carry 
it into the last century with conditions exactly re- 
flected on this side of the Atlantic. A condition 
of equilibrium is apparently the most difficult of all 
for the world's trade to maintain. 

"Business may be quietly good, but that ambi- 
tion to which we probably owe also the greater part 
of the world's progress insists upon forcing it 
beyond reasonable capacity. The result is always 
the same. The result of years of saving is over- 
confidence, inflation, waste, conversion of floating 
wealth into fixed wealth, and finally, collapse and 
panic. Here is the plain evidence of 200 years, and, 
it may be assumed at no risk that it is the evidence 
of all commercial systems. Joseph with his seven 
fat years and his seven lean years expressed nothing 
more. 

"What is not so readily realized is that a panic 
is followed by rapid recovery in stock prices, and 



TWO CLASSES OF STATISTICS 17 

one slower but still relatively quick, in general 
business. This again is followed by an arrest in 
business where, contrary to assumptions just as 
hasty and ill-balanced as those which caused the 
bear attitude on the panic break, boom conditions 
are not immediately restored, nor does anything 
of the kind develop within a year or so after the 
crisis. The first recovery runs too far and has 
always run too far. What follows is not collapse, 
but dullness. It becomes imperative to make real 
savings in order to build up for the next boom in 
^business." 

A list of twenty-five subjects about which 
merchants and investors systematically collect, 
analyze and index statistics is given on the fol- 
lowing page, and for convenience they are combined 
under twelve headings, which headings are herewith 
described in detail. Later in Chapters VI, VII and 
VIII these twenty-five subjects are described in de- 
tail. These are the subjects studied by the oldest, 
richest, and most conservative financial and mercan- 
tile houses of the world for determining which of the 
above mentioned periods the country is experi- 
encing or is about to enter at any given time. The 
use of fundamental statistics eliminates much 
guessing and uncertainty concerning mercantile or 
stock market movements. 

The only requirement is to collect, tabulate and 
study the weekly and monthly figures as they are 
received. These plainly show whether the general 
tendency of any market is upward or downward and 
whether it is the time to buy or sell, or to do neither. 



18 BUSINESS BAROMETERS 

As above stated, these fundamental statistics are 
even more important than comparative statistics. 
Not only are the latter of little value, unless sup- 
plemented by these fundamental statistics, but ex- 
perience has shown that such investors as have con- 
fined their operations to standard securities, and 
such merchants as have bought standard goods, 
have made fortunes for themselves and their cus- 
tomers by a study of these fundamental statistics 
exclusively. 

The twelve headings and twenty-five subjects, 
above mentioned, are as follows: 

I. Building and Real Estate: Including all New 
Building and Fire Losses. (1) 

II. 'Bank Clearings: Total Bank Clearings. (8) 
Bank Clearings excluding New York. (9) 

III. Business Failures: Failures, by number, 
amount and percentage. (12) 

IV. Labor Conditions: Immigration Figures. 
(13) 

V. Money Conditions: Money in Circulation. 
(2) Comptroller's Reports. (3) Loans of the 
Banks. (4) Cash held by the Banks. (5) De- 
posits of Banks. (6) Surplus Reserve of Banks. (7) 

VI. Foreign Trade: Imports. (14) Exports. 
(15) Balance of Trade. (16) 

VII. Gold Movements: Gold Exports and Im- 
ports. (17) Domestic and Foreign Exchange, and 
Money Rates. (18) 

VIII. Commodity Prices: Production of Gold. 
(20) Commodity Prices. (21) 



TWO CLASSES OF STATISTICS 19 

IX. Investment Market: Stock Exchange Trans- 
actions. (10) New Securities. (11) 

X. Condition of Crops: Crop Conditions and 
other Commodity Production. (22) 

XI. Railroad Earnings: Gross and Net Earn- 
ings. (23) Idle Car Figures. (24) Miscellaneous. 
(25) 

XII. Social Conditions : Political Factors. (19) 
These twelve subjects have by custom come to be 

Renown among merchants as the Twelve Barom- 
eters of Trade and may be briefly described as 
follows: 

I. The number of miles of new railroad con- 
structed, and especially figures on Building Statis- 
tics, give a clew to what new construction work is 
going on throughout the country. The exactness 
with which business conditions could have been 
foretold in the past by such figures is truly mar- 
vellous. It may also be stated that iron is one of 
the first commodities to fall in price and one of the 
first to rise ; therefore all merchants watch the price 
of iron. 

II. Bank Clearings are an extremely good ba- 
rometer of present conditions and are watched with 
keen interest by all successful merchants and manu- 
facturers. Many large corporations each week 
compare the changes in their total sales with the 
changes in the total bank clearings of the country. 
If they find that bank clearings continually show an 
increase, while their sales remain fixed, they im- 
mediately endeavor to ascertain the reason therefor. 



20 BUSINESS BAROMETERS 

Moreover, some firms divide the country into 
sections and compare by sections their sales with 
the bank clearings for said sections, thus having a 
check on the work of each individual sales office. 

III. Failures, both in number and amount, are 
especially good barometers of the conditions of 
trade. By ascertaining each month the average 
number of concerns in active business and the 
number that have failed, the percentage of failures 
may be readily determined. Contrary to the or- 
dinary impression, it is too few failures which fore- 
tell disaster and panic. 

IV. Figures on Immigration are carefully studied 
by manufacturers as indicative of the conditions of 
the labor market. The arrival of thousands of 
immigrants at Ellis Island indicates good surface 
conditions, with high prices for labor; but too large 
immigration figures foretell a change in conditions, 
followed by a period of depression. On the other 
hand, when large numbers of steerage passengers 
are leaving the country and the incoming steerage 
is reduced, business is in a state of depression; and 
only when the tide turns and immigrants again be- 
gin to arrive, is it a sign that conditions are again 
improving. 

V. Money is the basis of all trade and is there- 
fore probably the most sensitive of all barometers. 
Money is the representative in value of all things 
traded in and the scarcity of it seriously hampers 
the manufacturer and the merchant. Low money 
rates usually indicate poor present conditions but 
tending toward improved business; while high rates 



TWO CLASSES OF STATISTICS 21 

usually signify very prosperous present conditions 
but often foretell a coming panic. The active mer- 
chant, moreover, not only studies the money rates 
of this country, but also the average of the bank 
rates of England, France, and Germany. Each 
Thursday the Bank of England publishes a state- 
ment and makes an announcement as to the rates 
of discount at which it will handle first-class paper 
until further notice. This practically fixes the dis- 
count rate throughout Great Britain, and a con- 
tinued rise or fall of the rate in England is sure to 
be followed eventually by a similar movement in 
this country. 

VI. Figures on Foreign Trade are also of great 
value. The foreign trade of the country bears the 
same relation to the nation as a whole, as the in- 
come and expense of an individual bear to the finan- 
cial condition of the said individual. A man who 
for any length of time spends more money than he 
receives, is sure eventually to have trouble, and it 
is the same with the nation. Moreover, as the 
financial prosperity of the individual is almost in 
direct proportion to his net income, so the prosper- 
ity of a nation very largely depends upon the vol- 
ume of its foreign trade. 

VII. Monthly Gold Movements are also impor- 
tant for study in forecasting money rates, although 
like idle car figures, they are of little value after the 
actual annual figures are published. 

VIII. The subject of Commodity Prices is very 
important. The amount of money required to 
carry on a definite volume of business becomes 



22 BUSINESS BAROMETERS 

very much greater as business increases. For this 
reason, bankers very carefully watch commodity 
prices, knowing that high money rates invariably 
follow a marked increase in commodity prices, 

IX. The transactions and Prices of Stocks on the 
New York Stock Exchange are also interesting to 
merchants, as well as to investors. The way money 
is made on the New York Stock Exchange is by 
anticipating price changes. The leading operators 
have statisticians continually studying fundamen- 
tal conditions in order to forecast future conditions, 
and base their purchases and sales on the inform- 
ation obtained. Therefore, a slowly sagging market 
usually means that the ablest speculators expect 
in the near future, a period of depression in general 
business; and a slowly rising market usually means 
that prosperous business conditions may be expect- 
ed, unless the decline or rise is artificial and caused 
by manipulation. In fact, if it were not for manip- 
ulation, merchants could almost rely on the stock 
market alone as a barometer, and let these large 
market operators stand the expense of collecting 
the data necessary for determining fundamental 
conditions. Unfortunately, however, it is impos- 
sible by studying the stock market alone, to dis- 
tinguish between artificial movements and natural 
movements; therefore although bankers and mer- 
chants may watch the stock market as one of the 
barometers, yet they should give to it only a fair 
and proportional amount of weight. 

X. Of all statistics published by the govern- 
ment, the most important to the merchant are 



TWO CLASSES OF STATISTICS 23 

Crop Reports. Most of the government figures 
refer to what has happened in the past, and many 
of these figures are published a year or more after 
the events have happened. In the case of the 
crops, however, the government actually forecasts. 
Therefore all crop statistics are especially valuable 
to manufacturers and merchants. 

The crops are the mainstay of America and ap- 
proximately one-half of our population are depend- 
ent upon agriculture. Crop conditions form the 
basis of James J. Hill's predictions and business 
ventures, and Mr. Hill, by the way, is a great stu- 
dent of fundamental statistics. The principal 
crops, grain and cotton, have a tremendous influ- 
ence upon our wealth. Many industries and mer- 
cantile firms are absolutely dependent on the crops, 
and commodity prices are always more or less de- 
pendent thereon. The grain reports and cotton 
reports issued by the government are watched with 
great interest, and manufacturers and merchants 
even watch the weather reports throughout the 
West, the progress of the "green-bug," the condi- 
tion of the crops in the Argentine Republic, Russia 
and other countries. Abnormal crops are usually 
followed by a year of uncertain conditions. 

XI. Railroad Earnings are extremely instructive 
and are used by some merchants in preference to 
many of the above subjects. Practically all manu- 
factured goods, and even supplies in the local retail 
stores, are shipped by railroads; therefore, a weekly 
record of freight which the railroads are carrying 
serves as a barometer of the business of all the 



24 BUSINESS BAROMETERS 

farmers, manufacturers and merchants of the coun- 
try. Moreover, the steel companies, the car and 
locomotive builders, the coal industry and one 
hundred other industries are directly dependent on 
the railroads for their prosperity. Therefore, all 
merchants watch railroad earnings and new mileage 
constructed, and reduce or increase their stock of 
goods in accordance with what these reports show. 

XII. Regarding Politics; trade is always de- 
pendent upon the wise conduct of our national 
government. War clouds, even though at first not 
involving our nation, strongly affect all commodity 
and investment prices. Of course, all are not 
affected in the same way, as a war scare increases 
the prices of some commodities and reduces the 
prices of others; but all are affected in some way and 
to some extent. Even the President's message and 
especially tariff discussion and the approach of a 
presidential election, greatly affect prices and trade. 

To conclude, each of these twelve subjects is inti- 
mately bound up with what are known as "swings," 
during which all prices change from "high" to 
"low" and the reverse. As heretofore stated, 
all financial and commercial trade during the 
past two hundred years has been divided into dis- 
tinct cycles and each cycle consists of four periods; 
a period of prosperity, a period of decline, a period 
of depression, and a period of improvement. Each 
period is accompanied with distinct changes in the 
prices of stocks, labor and commodities; and by 
comparison with similar periods in previous cycles, 
it is possible with a degree of certainty to determine 



TWO CLASSES OF STATISTICS 25 

at about what period in one of these "swings" we 
happen to be. If the swing is far out over the 
perpendicular, we are sure that it must swing back 
of the centre as far as it swung forward, because 
action and reaction are always equal. 

No country, however, can be prosperous unless 
it is progressive. No nation can stand still; it 
must go either forward or backward. The normal 
demands of our country for new construction must 
show an increase each year to have conditions even 
remain constant. There must be a distinct in- 
crease in order to keep the vast number of our new 
citizens busy. Therefore, in comparing the present 
with the past, a similar figure does not necessarily 
mean better conditions ; but in many instances may 
mean an actual falling off. This is very important 
and must be remembered when estimating an area 
to use for comparison purposes in connection with 
the Composite Plot which will be described later. * 
Conclusion 

The amount of money which can be made by the 
study of such statistics is limited only by the origi- 
nal capital and the number of years the study is 
continued. Comparative statistics treat of com- 
parative conditions and are used for selecting se- 

*Some firms when interpreting figures on each of the various subjects for 
surface conditions, prefer each month to determine what the proper normal 
figure should be for each of these subjects and note the relation between the 
actual figures for surface conditions and these normal figures. The normal 
figure on any one subject is obtained by plotting the yearly figures on that 
subject for a period of ten or twenty years and by drawing on that plot a 
line showing the average trend for the entire period. Firms using this 
system obtain the normal figure for any future time, assuming that the gen- 
eral direction of this normal line will continue the same. Moreover, in the 
case of some subjects, it is often clearer to plot the relation of present figures 
to a ten-year average rather than the actual figures. This is especially true 
with plotting commodity prices and other figures which show only a slight 
variation with seasonable changes. The writer, however, believes In this 
latter method only as a check upon, and not as a substitute for, the Com- 
posite Plot. 



26 BUSINESS BAROMETERS 

curities and commodities which are absolutely safe 
and which have the greatest prospect of increase in 
market value under fixed market conditions. Fun- 
damental statistics treat of underlying conditions 
and are employed for determining these general mar- 
ket conditions and whether or not it is wise to pur- 
chase or to sell, or to do neither. Investors use this 
data in order to purchase securities only when they 
are low, holding them for from two to four years un- 
til they are high, and then selling and depositing in 
a bank the proceeds received therefrom. After said 
sale they leave the money on deposit for from two 
to four years*, until the same securities again sell 
low, when they withdraw the money and again pur- 
chase the same, or other high grade securities. 

Many of such investors triple their money every 
few years, with practically no risk and with very 
little trouble. By a study of these fundamental 
statistics some individuals, with little risk and 
without any marginal purchases, but by purchasing 
outright high grade, dividend paying securities, 
have turned an investment of $5,000 into $250, 
000 in about twenty years. When one realizes 
the meaning of this, — that an investment of $20,000 
grows to $1,000,000 within twenty years, — the 
value of fundamental statistics is apparent. If 
one is not strictly an investor, and willing under 
a broker's guidance to take advantage also of cer- 
tain intermediate movements, which come once or 

* If this withdrawal at the time of a panic meant the hoarding of money 
or taking the money from circulation, we should not recommend any such 
course. Instead, the money is only withdrawn from one bank and de- 
posited in another, probably being used to liquidate some loan. 



TWO CLASSES OF STATISTICS 27 

twice a year, possibly greater results are sometimes 
obtained; but of course this involves risk. 

Again, many brokers urge customers to take ad- 
vantage of declines; recommending "short selling" 
in periods of great activity and prosperity and also 
the purchase of securities on margin during periods 
of depression. Such advice is to be expected from 
a broker; but with short selling or margin pur- 
chases, there is connected another element of 
risk, and the investor then becomes a speculator. 
If margin purchases are undertaken, the margins 
should be large, — from thirty to forty per cent. 
Moreover, instead of selling short, the investors 
may buy "puts" for six months, or, if possible, for 
longer time, in the London market. These "puts" 
allow the holder to make nearly as much profit as 
if he had sold the stock short. Any loss he may 
sustain is limited to the price for the "put," or 
about $125 for one hundred shares of stock. 

Of course, there may be no real objection to 
buying on large margins; but the point which this 
book would emphasize is that: An investment of a 
thousand dollars can be multiplied to an investment 
of several hundred thousand dollars in about twenty 
years with but very little risk and without selling 
short or purchasing on margin. The only requisite 
is a constant study of comparative and funda- 
mental statistics, and sufficient self-control to act 
only in accordance with what these statistics 
clearly indicate, refusing to listen to either the 
optimism or the pessimism supplied by the daily 



28 BUSINESS BAROMETERS 

papers and by the many individuals who are always 
giving free advice. 

The above principles apply to bonds as truly as to 
stocks, and should be studied by the investors who 
purchase only bonds, as well as those who purchase 
stocks. Although bonds do not fluctuate as widely 
as stocks, and for this reason do not present, ap- 
parently, as great an opportunity for profit, yet 
their minimum interest yield is absolutely fixed, 
which is not true of even the most conservative 
stocks. Bonds are especially recommended to per- 
sons dependent upon the income derived from their 
investments; and the writer is inclined to advise 
that all persons should always have a portion of 
their principal on deposit in a bank, or in high grade 
bonds, short term notes or commercial paper. 

Merchants who never buy or sell securities use 
this data with equal profit. Fundamental sta- 
tistics clearly show the merchant when to buy and 
increase his stock of goods, and when to cut prices 
and reduce his stock. They also enable the mer- 
chant to forecast money conditions in order that he 
may intelligently decide whether to borrow the 
money necessary to allow customers further credit, 
or to reduce his loans and the indebtedness of his 
customers. Moreover, at all times these figures 
show the merchant the conditions of business 
throughout the country, so that he always knows 
whether the growth or contraction of his business 
is proportional to that of his competitors. 

Upon careful thought it must be admitted that 
the fortunes of American merchant princes must 



TWO CLASSES OF STATISTICS 29 

have been created by a knowledge of these facts, 
rather than simply by selling to the trade at a nom- 
inal profit. Therefore, not only does the proper 
use of fundamental statistics insure a merchant 
against losses, but their use should be almost as 
profitable to him as to the investor, enabling him 
to double and triple his capital every few years. 
Such ideas of the value of statistics should there- 
fore be especially interesting to the small merchant 
with capital of, for instance, only $10,000. For 
there is no reason why, with fundamental statistics 
as an aid to the elimination of the bad accounts 
and unsold goods, his capital should not automatic- 
ally increase to $250,000 within twenty years. 

But not only do students of fundamental sta- 
tistics make large fortunes for themselves and their 
followers, but such students are the very best pa- 
triots which a country can produce. The true 
patriot to-day is he who studies fundamental sta- 
tistics and acts in accordance with what they teach, 
liquidating during a period of reckless prosperity 
and purchasing very heavily during days of panic 
and great depression. The real traitor to-day is he 
who urges on or follows the crowd during a period 
of prosperity and locks up his money and refuses 
to extend aid during the dark days when banks are 
failing, railroads are becoming bankrupt, and the 
wheels of industry are stopped. Therefore, with 
every additional person who unites in this work, 
the next period of prosperity will be so much less 
riotous and the next panic so much less severe. 



CHAPTER II 

RANGE OF THE LEADING INVESTMENT STOCKS 
SINCE 1860, SHOWING HOW $2,500 INVESTED 
IN 1860 WOULD AMOUNT TO OVER $2,000,000 
IN 1912. SPECIAL TABLES ON INVESTMENT 
BONDS. 

THE accompanying chart is designed to show 
the fluctuations in the leading investment 
stocks from 1874 to date as accurately as 
may be. Only the best stocks of the period are con- 
sidered, and the stocks described are as representa- 
tive as possible of the different classes of traffic and 
of the different sections of the country. 

"Central of New Jersey" is a minority stock, 
"St. Paul" is a speculative stock, and "Delaware & 
Hudson" is a coal stock. The West is represented 
by "Great Northern," the Mississippi Valley by 
"Illinois Central," the South by "Louisville & 
Nashville," the central and Middle States by "New 
York Central" and "Pennsylvania." The New 
England States are represented by "New York, 
New Haven & Hartford." "Pullman" is chosen 
as the most conservative industrial. 

Of these ten, only three were in existence and 
prominent in 1860. New York Central, Illinois 
Central and Delaware, Lackawanna & Western 
were active then and are leaders still. 

In 1866 "Delaware & Hudson" and in 1872 
"Louisville & Nashville" became active, and in 
1874 "Central of Newjersey." In 1876 "Pullman" 
became active and in 1889 "Pennsylvania." These 






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PRICE RANGE OP STOCKS AND BONDS 

The upper chart shows the range of ten investment stocks. A much greater fluctuation would be shown if more 
speculative stocks such as Union Pacific, Reading, etc., were used. This table, however, is prepared to impress upon 
investors the opportunity which they have for making money by the purchase of the most conservative dividend paying 
stocks only. 

If the reader desires to mark on this plot the point where the average stands AT ANY TIME he needs only to aver- 
age the current prices of the ten stocks mentioned on page 32 remembering to add to the price of Great Northern the 
price of the Ore Certificates. 

The lower chart shows the range of some representative high grade bonds of the Chicago, Milwaukee & St. Paul. 
New York Central, an J IVtiiisvlv.nii., milnxuls. rogether with others of the State uf Massachusetts and Cltv of New York. 
More bonds would have been taken but at present It is impossible to obtain a list in existence that goes back so for. 







RANGE OF STOCK MARKET 31 

are the ten stocks used exclusively until 1900 
when "Delaware, Lackawanna & Western" was, 
for various reasons, omitted. As "Great North- 
ern" sold for the same price, namely 91, at about 
that time, that was substituted in its stead. 

In other words, only good stocks and truly rep- 
resentative stocks have been included in the list. 
Stocks which have shown any abnormal rise have 
purposely been avoided. For this reason, stocks 
such as "Union Pacific," "Atchison" and "Read- 
ing" have been omitted. More industrials would 
have been included, if they had been in existence 
a longer period; but, as most of the companies 
have been organized only ten or fifteen years, 
this was not possible. Therefore, the chart may 
be depended upon, absolutely, as showing the 
fluctuations which a conservative investor may 
expect. 

It has also been very interesting to figure the 
income received upon the investment, which varied 
from 5% to 10%. If all "rights" were considered 
the average income would probably be about 10%; 
but in this also any possible exaggeration has been 
avoided. For greater exactness, since "Great 
Northern" gave its ore certificates, the price of 
these certificates has been included with the price 
of the stock. The complete list, as it stood at the 
low point in 1907 and on January 3, 1910 and 
1911 is as follows: 

Div. 

Central New Jersey $8 

Chicago, Mil. & St. Paul 7 
Delaware & Hudson 9 



Low 




Jan. 




Jan. 


1907 


Div. 


1910 


Div. 


1911 


144 


$8 


312 


$8 


270 


93 


7 


158 


7 


124 


124 


9 


185 


9 


164 



32 BUSINESS BAROMETERS 





Low 




Jan. 




Jan. 


Great Northern plus Div - 


1907 


Div. 


1910 


Div. 


1911 


1 Ore. Cert. $7 


144 


$8 


225 


$8 


180 


Illinois Central 7 


116 


7 


146 


7 


132 


Louisville & Nashville 6 


85 


5* 


158 


7 


145 


New York Central 6 


89 


5 


125 


6 


112 


N. Y., N. H. & Hartford, 8 


127 


8 


158 


8 


150 


Pennsylvania 7 


103 


6 


136 


6 


129 


Pullman 8 


135 


8 


189 


8 


160 



The list includes "Central of New Jersey," and 
"Chicago, Milwaukee & St. Paul," in order to 
tabulate a minority stock and a speculative stock. 
As an investment, however, others may be prefer- 
able. When substituting them, some brokers 
recommend selecting stocks selling for about the 
same prices as those omitted. It should always 
be remembered that an investor, when buying or 
selling, should not study the present prices of the 
stocks which he intends to purchase; but rather the 
prices of the ten representative stocks in the list 
given above. This is because he should buy or sell 
in accordance with general conditions, and not be 
governed by the price of any stocks which he 
happens to hold. A diagram of some other ten 
stocks may be misleading and cause trouble. 

The actual low and high prices of the above ten 
stocks from 1860 to date are given in the accom- 
panying tables. The "averages" given at the be- 
ginning of each year previous to 1905 are averages 
of all the high and all the low prices, and may there- 
fore be a theoretical rather than an actual figure. 
1860 AVERAGE 59-93 

Lackawanna ranged from 54 (Jan.) to 99 (June) ; 
111. Cent. 55 (Jan.) to 89 (Aug.) ; N. Y. Cent. 92 
(Sept.) to 69 (Dec). 



RANGE OF STOCK MARKET 33 

1861 AVERAGE 62-84 
Lackawanna ranged from 84 (Mch.) to 65 (Dec.) ; 
111. Cent. 88 (Jan.) to 55 (April); N. Y. Cent. 82 
(Jan.) to 68 (April). 

1862 AVERAGE 71-107 
Lackawanna ranged from 80 (April) to 130 (Dec.) ; 
111. Cent. 55 (July) to 84 (Oct.) ; N. Y. Cent. 79 
(Jan.) to 107 (Oct.) 

1863 AVERAGE 106-153 
Lackawanna ranged from 130 (Jan.) to 198 
(Dec); 111. Cent. 83 (Jan.) to 126 (Aug.); N. Y. 
Cent. 107 (Mch.) to 140 (Sept.). 

1864 AVERAGE 138-148 
Lackawanna ranged from 195 (Jan.) to 265 

(Sept.); 111. Cent. 110 (Mch.) to 135 (Oct.); N. Y. 
Cent. 145 (Mch.) to 109 (Oct.). 

1865 AVERAGE 125-158 
Lackawanna ranged from 225 (Jan.) to 199 

(Mch.); 111. Cent. 92 (Mch.) to 130 (July); N. Y. 
Cent. 119 (Jan.) to 85 (April). 

1866 AVERAGE 99-128 

St. Paul ranged from 41 (Mch.) to 64 (Nov.); 
Del. & Hud. 132 (Mch.) to 160 (Nov.); Lacka- 
wanna 162 (Jan.) to 127 (Feb.) ; 111. Cent. 131 (Jan.) 
to 112 (Feb.) ; N. Y. Cent. 86 (Feb.) to 123 (Nov.). 

1867 AVERAGE 98-122 

Cent, of N. J. ranged from 125 (Jan.) to 113 
(Dec); St. Paul 25 (April) to 54 (July); Del. & 
Hud. 139 (Jan.) to 156 (Jan.); Lackawanna 130 
(July) to 109 (Oct.); 111. Cent. Ill (Jan.) to 135 
(Dec); N. Y. Cent. 94 (Feb.) to 118 (Dec.) ; New 
Haven 114 (Jan.) to 140 (Dec). 



34 BUSINESS BAROMETERS 

1868 AVERAGE 108-147 

Cent, of N. J. ranged from 126 (June) to 110 
(Dec.); St. Paul 46 (Feb.) to 111 (Oct.); Del. & 
Hud. 165 (May) to 119 (Aug.); Lackawanna 110 
(Jan.) to 132 (Oct.); 111. Cent. 130 (Jan.) to 159 
(July); N. Y. Cent. 110 (April) to 159 (Dec.) ; New 
Haven 133 (Jan.) to 159 (May). 

1869 AVERAGE 114-160 

St. Paul ranged from 84 (Aug.) to 61 (Sept.); 
Del. & Hud. 134 (June) to 120 (Dec.) ; Lackawanna 
120 (Jan.) to 104 (Nov.) ; 111 Cent. 148 (May) to 130 
(Dec); N. Y. Cent. 217 (July) to 153 (Sept.); 
New Haven 160 (Jan.) to 120 (April). 

1870 AVERAGE 102-120 

St. Paul ranged from 75 (Jan.) to 52 (Dec.) ; 
Del. & Hud. 115 (Mch.) to 127 (July); Lack- 
awanna 112 (May) to 100 (Sept.); 111. Cent. 145 
(Feb.) to 129 (July) ; N. Y. Cent. 86 (Jan.) to 102 
(June) ; New Haven 134 (Jan.) to 159 (June.) 

1871 AVERAGE 103-117 

St. Paul ranged from 48 (Jan.) to 64 (Sept.); 
Del. & Hud. 115 (Feb.) to 125 (Dec.) ; Lackawanna 
102 (Feb.) to 111 (Sept.); 111. Cent. 139 (Jan.) to 
132 (Oct.); N.Y. Cent. 103 (April) to 84 (Oct.); 
New Haven 140 (April) to 160 (June). 

1872 AVERAGE 97-110 

St. Paul ranged from 64 (April) to 51 (Nov.); 
Del. & Hud. 124 (Jan.) to 115 (Oct.) ; Lackawanna 
112 (Mch.) to 91 (Dec); 111. Cent. 140 (June) to 
119 (Nov.) ; Louis. & Nash. 81 (Oct.) to 79 (Dec); 
N. Y. Cent. 101 (April) to 89 (Nov.); New Haven 
148 (June) to 138 (Dec). 



RANGE OF STOCK MARKET 35 

1873 AVERAGE 75-106 

St. Paul ranged from 62 (April) to 21 (Nov.); 
Del. &Hud. 124 (Feb.) to 99 (Nov.); Lackawanna 
106 (June) to 79 (Nov.); 111. Cent. 126 (Jan.) to 
90 (Nov.); Louis. & Nash. 79 (Mch.) to 50 (Dec.); 
N. Y. Cent. 106 (Feb.) to 77 (Nov.); New Haven 
142 (Feb.) to 112 (Nov.). 

1874 AVERAGE 87-99 

Cent, of N. J. ranged from 98 (Jan.) to 109 (Feb.) ; 
St. Paul 41 (Jan.) to 31 (May); Del. & Hud. 121 
(Jan.) to 113 (Aug.); Lackawanna 99 (Jan.) to 112 
(Feb.) ; 111. Cent. 108 (Feb.) to 90 (Oct.) ; Louis. 
& Nash. 53 (Jan.) to 59 (Feb.) ; N. Y. Cent. 105 
(Mch.) to 95 (May); New Haven 122 (Jan.) to 139 
(Nov.). 

1875 AVERAGE 87-100 

Cent, of N. J. ranged from 120 (April) to 99 
(Oct.) ; St. Paul 40 (April) to 28 (June) ; Del. & 
Hud. 110 (Feb.) to 124 (Dec); Lackawanna 106 
(Jan.) to 123 (April); 111. Cent. 106 (April) to 88 
(Oct.) ; Louis. & Nash. 40 (Feb.) to 36 (April) ; 
N. Y. Cent. 100 (May) to 107 (May) ; New Haven 
133 (Jan.) to 147 (Dec). 

1876 AVERAGE 62-100 

Cent, of N. J. ranged from 109 (Feb.) to 21 
(Sept.); St. Paul 46 (Feb.); to 18 (Nov.); Del. & 
Hud. 125 (Jan.) to 61 (Oct.); Lackawanna 120 
(Jan.) to 64 (Oct.) ; 111. Cent. 103 (Mch.) to 60 (Dec) ; 
Louis. & Nash. 32 (April) to 24 (Dec); N. Y. 
Cent. 117 (Feb.) to 96 (Sept.); New Haven 146 
(Jan.) to 159 (Mch.); Pullman 70 (Jan.) to 85 
(April). 



36 BUSINESS BAROMETERS 

1877 AVERAGE 48-76 

Cent, of N. J. ranged from 37 (Jan.) to 6 (June) ; 
St. Paul 11 (April) to 42 (Oct.); Del. & Hud. 74 
(Jan.) to 25 (June); Lackawanna 77 (Jan.) to 30 
(June); 111. Cent. 40 (April) to 79 (Oct.); Louis. 
& Nash. 26 (Mch.) to 40 (Dec.) ; N. Y. Cent. 85 
(April) to 109 (Oct.) ; New Haven 146 (April) to 
158 (Dec.) ; Pullman 75 (Feb.) to 71 (Mch.). 

1878 AVERAGE 61-76 

Cent, of N. J. ranged from 13 (Jan.) to 45 (July) ; 
St. Paul 54 (June) to 27 (Sept.); Del. & Hud. 59 
(July) to 34 (Dec); Lackawanna 61 (July) to 41 
(Dec.) ; 111. Cent. 72 (Feb.) to 85 (June) ; Louis. & 
Nash. 35 (Oct.) to 39 (Dec); N. Y. Cent. 103 
(Mch.) to 115 (Sept.); New Haven 153 (Jan.) to 
162 (Nov.) ; Pullman 72 (Feb.) to 80 (July). 

1879 AVERAGE 66-106 

Cent, of N. J. ranged from 33 (Jan.) to 89 (Nov.) ; 
St. Paul 34 (Jan.) to 82 (Nov.); Del. & Hud. 38 
(Feb.) to 89 (Nov.) ; Lackawanna 43 (Jan.) to 94 
(Nov.) ; 111. Cent. 79 (Mch.) to 100 (Dec.) ; Louis. 
& Nash. 35 (Feb.) to 89 (Dec); N. Y. Cent. 112 
(Mch.) to 133 (Oct.); New Haven 171 (June) to 
154 (Nov.) ; Pullman 73 (Jan.) to 109 (Nov.). 

1880 AVERAGE 87-131 

Cent, of N. J. ranged from 85 (April) to 45 (May) ; 
St. Paul 66 (May) to 114 (Dec); Del. & Hud. 60 
(May) to 92 (Dec); Lackawanna 68 (May) to 110 
(Dec); 111. Cent. 99 (Jan.) to 127 (Dec); Louis. & 
Nash. 173 (Nov.) to 77 (Dec); N. Y. Cent. 122 
(May) to 155 (Dec) ; New Haven 155 (Jan.) to 180 
(Oct.) ; Pullman 107 (Jan.) to 146 (Jan.). 



RANGE OF STOCK MARKET 37 

1881 AVERAGE 110-137 

Cent, of N. J. ranged from 82 (Jan.) to 112 
(Feb.); St. Paul 101 (Feb.) to 129 (June); Del. & 
Hud. 89 (Jan.) to 115 (Mch.); Lackawanna 101 
(Jan.) to 131 (Mch.); 111. Cent. 124 (Jan.) to 146 
(May); Louis. & Nash. 79 (Feb.) to 110 (May); 
N. Y. Cent. 155 (Jan.) ; to 130 (Dec.) ; New Haven 
164 (Mch.) to 190 (June); Pullman 120 (Jan.) to 
150 (Jan.). 

1882 AVERAGE 94-134 

Cent, of N. J. ranged from 93 (Feb.) to 63 (Nov.) ; 
St. Paul 128 (Sept.) to 96 (Nov.); Del. & Hud. 102 
(Mch.) to 119 (Aug.); Lackawanna 116 (April) to 
150 (Sept.); 111. Cent. 127 (Jan.) to 150 (Oct.); 
Louis. & N^sh. 100 (Jan.) to 46 (Nov.) ; N. Y. 
Cent. 123 (May) to 138 (Aug.); New Haven 168 
(Feb.) to 186 (Feb ); Pullman 145 (Jan.) to 117 
(June). V 

1883 AVERAGE 103-121 

Cent, of N. J. ranged from 68 (Jan.) to 90 (Oct.) ; 
St. Paul 108 (Jan.) to 91 (Dec); Del. & Hud. 112 
(April) to 102 (Oct.); Lackawanna 131 (April) 
to 111 (Oct.); 111. Cent. 148 (June) to 124 (Aug.); 
Louis. & Nash. 58 (Jan.) to 40 (Aug.); N. Y. Cent. 
129 (Mch.) to 111 (Dec); New Haven 169 (Jan.) to 
183 (June) ; Pullman 134 (June) to 112 (Dec). 
1884 AVERAGE 80-115 

Cent, of N. J. ranged from 90 (Jan.) to 37 (Dec.) ; 
St. Paul 94 (Jan.) to 58 (June); Del. & Hud. 114 
(Feb.) to 67 (Dec) ; Lackawanna 133 (Mch.) to 86 
(Dec); N. Y. Cent. 140 (Feb.) to 110 (June); 
Louis. & Nash. 51 (Mch.) to 22 (June); N. Y. 



38 BUSINESS BAROMETERS 

Cent. 122 (Mch.) to S3 (Nov.) ; New Haven 184 
(May) to 175 (July); Pullman 117 (Jan.) to 90 
(May). 

1885 AVERAGE 83-113 
Cent, of N. J. ranged from 31 (Mch.) to 52 
(Aug.) ; St. Paul 64 (June) to 99 (Nov.) ; Del. & 
Hud. 66 (Jan.) to 100 (Nov.); Lackawanna 82 
(Jan.) to 129 (Dec); 111. Cent. 119 (Jan.) to 140 
(Dec); Louis. & Nash. 22 (Jan.) to 51 (Nov.); 
N. Y. Cent. 81 (June) to 107 (Nov.) ; New Haven 
175 (Jan.) to 204 (Dec); Pullman 107 (Jan.) to 
137 (Nov.). 

1886 AVERAGE 102-123 

Cent, of N. J. ranged from 42 (Jan.) to 64 
(Sept.) ; St. Paul 82 (May) to 99 (Sept.) ; Del. & 
Hud. 87 (Jan.) to 108 (Feb.); Lackawanna 115 
(Jan.) to 144 (Dec); 111. Cent. 143 (Feb.) to 130 
(Jan.) ; Louis. & Nash. 33 (May) to 69 (Dec.) ; N. Y. 
Cent. 98 (Mch.) to 117 (Oct.); New Haven 204 
(Jan.) to 223 (Nov.); Pullman 128 (May) to 147 
(Oct.). 

1887 AVERAGE 104-124 

Cent, of N. J. ranged from 64 (May) to 47 
(July); St. Paul 95 (May) to 65 (Oct.); Del. & 
Hud. 96 (Sept.) to 106 (Nov.); Lackawanna 139 
(June) to 123 (Oct.); 111. Cent. 138 (May) to 114 
(Oct.) ; Louis. & Nash. 70 (April) to 54 (Oct.) ; 
N. Y. Cent. 114 (May) to 101 (Oct.); New Haven 
208 (Feb.) to 233 (May); Pullman 159 (May) to 
136 (Nov.). 

1888 AVERAGE 102-129 

Cent, of N. J. ranged from 73 (April) to 95 



RANGE OF STOCK MARKET 39 

(Dec); St. Paul 78 (Feb.) to 59 (Dec.); Del. & 
Hud. 103 (Jan.) to 134 (Dec.); Lackawanna 123 
(April) to 145 (Oct.); 111. Cent. 123 (Aug.) to 113 
(Dec); Louis. & Nash. 64 (Jan.) to 50 (April) ; 
N. Y. Cent. 102 (April) to 111 (Sept.) ; New Haven 
215 (Jan.) to 244 (Dec); Pullman 135 (April) to 
175 (Sept.). 

1889 AVERAGE 123-144 

Cent, of N. J. ranged from 92 (Mch.) to 131 
(Oct.) ; St. Paul 60 (Mch.) to 75 (June) ; Del. & 
Hud. 130 (Mch.) to 156 (Sept.); Lackawanna 134 
(April) to 151 (Sept.); 111. Cent. 106 (Feb.) to 118 
(Dec); Louis. & Nash. 56 (Jan.) to 87 (Nov.); 
N. Y. Cent. 110 (Feb.) to 104 (July); New Haven 
241 (Jan.) to 279 (Sept.); Pullman 189 (Jan.) to 
193 (Jan.). 

1890 AVERAGE 98-141 

Cent, of N. J. ranged from 128 (May) to 92 
(Nov.) ; St. Paul 78 (May) to 44 (Nov.) ; Del. & 
Hud. 140 (April) to 120 (Dec); Lackawanna 149 
(July) to 123 (Nov.); 111. Cent. 120 (Jan.) to 85 
(Nov.) ; Louis. & Nash. 92 (May) to 65 (Nov.) ; 
N. Y. Cent. Ill (June) to 95 (Dec); New Haven 
224 (Jan.) to 270 (June); Pennsylvania 95 to 113; 
Pullman 222 (July) to 160 (Dec). 

1891 AVERAGE 95-138 

Cent, of N. J. ranged from 122 (April) Jto 105 
(June); St. Paul 51 (Mch.) to 82 (Dec); Del. & 
Hud. 140 (Sept.) to 120 (Dec); Lackawanna 130 
(July) to 145 (Sept.) ; 111. Cent. 90 (Mch.) to 109 
(Dec); Louis. & Nash. 65 (Aug.) to 83 (Dec.) ; 
N. Y. Cent. 98 (July) to 119 (Dec); New Haven 



40 BUSINESS BAROMETERS 

271 (Feb.) to 24 (Nov.); Pennsylvania 99 to 115; 
Pullman 196 (Jan.) to 172 (Nov.). 

1892 AVERAGE 122-142 

Cent, of N. J. ranged from 111 (Jan.) to 145 
(Feb.) ; St. Paul 75 (April) to 84 (Aug.) ; Del. & 
Hud. 122 (Jan.) to 149 (April); Lackawanna 138 
(Jan.) to 167 (Feb.); 111. Cent. 110 (Jan.) to 95 
(Sept.) ; Louis. & Nash. 84 (Jan.) to 64 (Sept.) ; 
N. Y. Cent. 119 (Mch.) to 107 (Sept.) ; New Haven 
224 (Jan.) to 252 (June); Pennsylvania 106 to 114; 
Pullman 184 (Jan.) to 200 (May). 

1893 AVERAGE 98-130 

Cent, of N. J. 132 (Jan.) to 84 (July); St. Paul 
S3 (Jan.) to 46 (July) ; Del. & Hud. 139 (Jan.) to 
102 (July); Lackawanna 127 (July) to 175 (Nov.); 
111. Cent. 104 (Jan.) to 86 (July) ; Louis. & Nash. 77 
(Jan.) to 39 (Dec); N. Y. Cent. Ill (Jan.) to 92 
(July); New Haven 262 (Jan.) to 188 (Sept.); 
Pennsylvania 93 (Dec.) to 111 (Jan.); Pullman 206 
(April) to 132 (Aug.). 

1894 AVERAGE 105-123 

Cent, of N. J. ranged from 117 (Mch.) to 87 
(Dec.) ; St. Paul 54 (Jan.) to 67 (Sept.) ; Del. & 
Hud. 144 (April) to 119 (Oct.); Lackawanna 174 
(Sept.) to 155 (Oct.); 111. Cent. 95 (Sept.) to 82 
(Dec); Louis & Nash. 40 (Jan.) to 57 (Sept.); 
N. Y. Cent. 95 (May) to 102 (Aug); New Haven 
178 (July) to 197 (Dec.) ; Pennsylvania 96 (Jan.) to 
104 (Apr.); Pullman 174 (Apr.) to 152 (July). 

1895 AVERAGE 103-128 

Cent, of N. J. ranged from 81 (Feb.) to 116 
(Sept.); St. Paul 53 (Mch.) to 78 (Sept.); Del. & 



RANGE OF STOCK MARKET 41 

Hud. 134 (Sept.) to 118 (Dec); Lackawanna 174 
(Oct.) to 154 (Dec); 111. Cent. 81 (Jan.) to 106 
(Sept.); Louis. & Nash. 66 (Sept.) to 39 (Dec); 
N. Y. Cent. 104 (Aug.) to 90 (Dec.) ; New Haven 
218 (June) to 174 (Dec); Pennsylvania 97 (Jan) to 
115 (Sept.) ; Pullman 178 (June) to 146 (Dec). 

1896 AVERAGE 100-119 

Cent, of N. J. ranged from 87 (Aug.) to 110 
(Nov.) ; St. Paul 59 (Aug.) to 80 (Nov.) ; Del. & 
Hud. 129 (Feb.) to 114 (Aug.); Lackawanna 166 
(June) to 138 (Aug.) 111. Cent. 98 (Jan.) to 84 
(Aug.); Louis. & Nash. 55 (Feb.) to 37 (Aug.); 
N. Y. Cent. 99 (Feb.) to 88 (Aug.) ; New Haven 
184 (Jan.) to 160 (July); Pennsylvania 99 to 109; 
Pullman 164 (Feb.) to 138 (Aug.). 

1897 AVERAGE 103-117 

Cent, of N. J. ranged from 103 (Jan.) to 68 (May) ; 
St. Paul 69 (April) to 102 (Sept.) ; Louis & Nash. 99 
(April) to 123 (Sept.); Lackawanna 164 (May) to 
164 (Aug.); 111. Cent. 91 (April) to 110 (Aug.); 
Louis. & Nash. 40 (April) to 63 (Sept.); N. Y. 
Cent. 92 (Feb.) to 115 (Sept.); New Haven 160 
(Feb.) to 185 (Sept.); Pennsylvania 103 (Jan.) to 
119 (Sept.) ; Pullman 152 (Jan.) to 185 (Sept.). 

1898 AVERAGE 106-133 

Cent, of N. J. ranged from 84 (Nov.) to 99 
(Dec); St. Paul 83 (April) to 120 (Dec); Del. & 
Hud. 114 (Feb.) to 93 (Nov.); Lackawanna 159 
(Feb.) to 140 (Oct.); 111. Cent. 96 (April) to 115 
(Dec); Louis. & Nash. 44 (April) to 65 (Dec); 
N. Y. Cent. 105 (Mch.) to 124 (Dec.) ; New Haven 



42 BUSINESS BAROMETERS 

178 (Jan.) to 201 (Dec); Pennsylvania 110 (Mch.) 
to 123 (Dec.) ; Pullman 216 (July) to 132 (Nov.). 

1899 AVERAGE 123-151 

Cent, of N. J. ranged from 97 (Jan.) to 126 
(Nov.); St. Paul 136 (Sept.) to 112 (Dec.); Del. & 
Hud. 106 (Jan.) to 135 (Sept.); Lackawanna 157 
(Jan.) to 194 (Oct.); 111. Cent. 122 (Jan.) to 105 
(Dec); Louis. & Nash. 63 (Mch.) to 88 (Oct.); 
N. Y. Cent. 144 (Mch.) to 120 (Dec) ; New Haven 
198 (Jan.) to 222 (April); Pennsylvania 122 (Jan.) 
to 142 (Jan.) ; Pullman 156 (Jan.) to 207 (Oct.). 

1900 AVERAGE 134-165 

Cent, of N. J. ranged from 115 (Jan.) to 150 
(Dec.) ; St. Paul 108 (June) to 148 (Dec.) ; Del. & 
Hud. 106 (Sept.) to 134 (Dec); *Gt. Northern 211 
(June) to 276 (Dec); 111. Cent. 110 (June) to 132 
(Dec) ; Louis. & Nash. 68 (Sept.) to 89 (Dec.) ; 
N. Y. Cent. 125 (June) to 145 (Dec); New Haven 
215 (Jan.) to 207 (Sept.); Pennsylvania 124 (Sept.) 
to 149 (Dec) ; Pullman 176 (June) to 204 (Dec). 

* 1901 AVERAGE 148-190 
Cent, of N. J. 145 (Jan.) to 196 (Dec.) ; St. Paul 
134 (May) to 188 (May); Del. & Hud. 185 (April) 
to 105 (May); Gt. Northern 208 (Mch.) to 167 
(May); 111. Cent. 124 (May) to 154 (June); Louis. 
& Nash. 76 (May) to 111 (June); N. Y. Cent. 129 
(Jan.) to 174 (Nov.) ; New Haven 206 (Feb.) to 217 
(June); Pennsylvania 161 (April) to 137 (May); 
Pullman 195 (Jan.) to 225 (Oct.). 

* Great Northern is substituted here for Lackawanna with the Ore 
Certificates added beginning with 1907. 



RANGE OF STOCK MARKET 43 

1902 AVERAGE 168-201 

Cent, of N. J. ranged from 198 (Jan.) to 165 
(Nov.) ; St. Paul 160 (Jan.) to 198 (Sept.) ; Del. & 
Hud. 184 (Jan.) to 153 (Nov.); Gt. Northern 181 
(Mch.) to 203 (Dec.); 111. Cent. 137 (Jan.) to 173 
(Aug.) ; Louis. & Nash. 102 (Jan.) to 159 (Aug.) ; 
N. Y. Cent. 168 (Jan.) to 147 (Nov.); New Haven 
209 (Jan.) to 225 (April) ; Pennsylvania 147 (Jan.) 
to 170 (Sept.) ; Pullman 215 (Jan.) to 250 (April). 

1903 AVERAGE 149-190 

Cent, of N. J. ranged from 190 (Jan.) to 153 
(Oct.); St. Paul 183 (Jan.) to 133 (Aug.); Del. & 
Hud. 183 (Feb.) to 149 (Aug.) ; Gt. Northern 209 
(Jan.) to 160 (Oct.); 111. Cent. 151 (Jan.) to 125 
(July); Louis. & Nash. 130 (Jan.) to 95 (Sept.); 
N. Y. Cent. 156 (Jan.) to 112 (July); New Haven 
225 (Jan.) to 187 (May); Pennsylvania 157 (Jan.) 
to 187 (May); Pennsylvania 157 (Jan.) to 110 
(Nov.) ; Pullman 235 (Jan.) to 196 (July). 

1904 AVERAGE 152-192 

Cent, of N. J. ranged from 154 (Feb.) to 194 
(Nov.); St. Paul 137 (Feb.) to 177 (Dec); Del. & 
Hud. 149 (Mch.) to 190 (Dec); Gt. Northern 170 
(Mch.) to 242 (Dec); 111. Cent. 125 (Feb.) to 159 
(Dec); Louis. & Nash. 101 (Feb.) to 148 (Dec); 
N. Y.Cent. 112 (Mch.) to 145 (Dec); New Haven 
185 (May) to 199 (Oct.) ; Pennsylvania 111 (Mch.) 
to 140 (Dec.) ; Pullman 209 (Mch.) to 242 (Nov.). 
1905 AVERAGE 180-206 

Cent, of N. J. ranged from 190 (May) to 235 
(Oct.); St. Paul 168 (May) to 187 (Aug.); Del. & 
Hud. 178 (May) to 237 (Nov.); Gt. Northern 236 



44 BUSINESS BAROMETERS 

(Jan.) to 335 (April) ; 111. Cent. 152 (Jan.) to 183 
(Sept.); Louis. & Nash. 134 (Jan.) to 157 (Sept.); 
N. Y. Cent. 167 (Mch.) to 136 (May); New Haven 
216 (Sept.) to 191 (Dec); Pennsylvania 131 (May) 
to 148 (Aug.); Pullman 230 (May) to 258 (Aug.). 

1906 AVERAGE 176-205 

Cent, of N. J. ranged from 204 (May) to 239 
(May) ; St. Paul 189 (Nov.) to 146 (Dec.) ; Del. & 
Hud. 209 (Mch.) to 189 (May) ; Gt. Northern 348 
(Feb.) to 249 (Dec.) ; 111. Cent. 164 (May) to 184 
(June); Louis. & Nash. 156 (Jan.) to 136 (May); 
N. Y. Cent. 156 (Jan.) to 126 (Nov.) ; New Haven 
204 (Jan.) to 189 (Dec.) ; Pennsylvania 147 (Jan.) 
to 122 (July); Pullman 270 (Nov.) to 180 (Dec). 

1907 AVERAGE 119-182 

Cent, of N. J. ranged from 220 (Jan.) to 144 
(Oct.) ; St. Paul 157 (Jan.) to 93 (Nov.) ; Del. & 
Hud. 227 (Jan.) to 124 (Nov.) ; Gt. Northern *274 
(Jan.) to 144 (Nov.); 111. Cent. 172 (Jan.) to 116 
(Nov.); Louis. & Nash. 145 (Jan.) to 85 (Nov.); 
N. Y. Cent. 134 (Jan.) to 89 (Nov.) ; New Haven 
189 (Jan.) to 127 (Nov.) ; Pennsylvania 141 (Jan.) 
to 113 (Nov.); Pullman 181 (Jan.) to 137 (Nov.) 

1908 AVERAGE 126-164 

Central of N. J. ranged from 229 (Dec.) to 160 
(Feb.) ; St. Paul 152 (Dec.) to 103 (Jan.) ; Del. & 
Hud. 181 (Dec.) to 141 (Feb.); Gt. Northern *223 
(Dec.) to 162 (Feb.) ; Illinois Central 150 (Nov.) to 
122 (Feb.) ; Louis. & Nash. 126 (Dec.) to 87 (Feb.) ; 
N. Y. Cent. 126 (Dec.) to 90 (Jan.) ; New Haven 161 
(Nov.) to 128 (Jan.); Pennsylvania 132 (Dec.) to 
109 (Jan.); Pullman 174 (Jan.) to 147 (Jan.). 

♦These prices include the price of one Ore Certificate. 



RANGE OF STOCK MARKET 45 

1909 AVERAGE 155-193 

Central of N. J. ranged from 323 (Sept.) to 215 
(Feb.); St. Paul 165 (Sept.) to 141 (Feb.); Del. & 
Hud. 200 (May) to 167 (Feb.); Gt. Northern *246 
(Aug.) to 201 (Feb.); Illinois Central 162 (Aug.) 
to 137 (Feb.); Louis. & Nash. 162 (Aug.) to 121 
(Jan.) ; N. Y. Central 147 (Aug.) to 120 (Feb.) ; 
New Haven 174 (June) to 154 (Nov.) ; Pennsylvania 
151 (Sept.) to 126 (Feb.); Pullman 200 (Aug.) to 
169 (Jan.). 

1910 AVERAGE 133-165 

Central of N. J. ranged from 312 (Jan.) to 248 
(July); St. Paul 158 (Jan.) to 114 (June); Del. & 
Hudson 185 (Jan.) to 149 (July); Gt. Northern 
*224 (Jan.) to 163 (July) ; Illinois Central 147 (Jan.) 
to 124 (July); Louis. & Nash. 160 (Jan.) to 132 
(July); N. Y. Central 128 (Mar.) to 105 (July); 
New Haven 162 (Mar.) to 149 (Apr.) ; Pennsylvania 
138 (Mar.) to 122 (July); Pullman 200 (Jan.) to 
155 (June). 

1911 AVERAGE 163-147 

Central of N. J. ranged from 320 (Dec.) to 260 
(Aug.); St. Paul 134 (Feb.) to 106 (Oct.); 
Del. & Hudson 175 (June) to 160 (Sept.); Gt. 
Northern *203 (June) to 163 (Sept.); Illinois 
Central 147 (July) to 132 (Jan.); Louis & Nash. 
161 (Nov.) to 136 (Sept.); N. Y. Central 115 
(Feb.) to 100 (Sept.) ; New Haven 151 (Feb.) to 
127 (Sept.); Pennsylvania 130 (Feb.) to 119 
(Sept.); Pullman 163 (Jan.) to 154 (Sept.). 

(For quotations and prices subsequent to 1911, see Addenda at end of 
the book.) 

* These prices include the price of one ore certificate. 



POSSIBILITIES OF PROFIT 47 

Possibilities of Profit in Conservative 
Investment Stocks 

Suppose $2,500 had been invested in 1860, in the 
stocks given in the preceding pages, and they had 
been bought and sold again, every three or four 
years, what would have been the history of that 
$2,500? To what would it have amounted to- 
day? 

In detail the answer would be as follows: Starting 
in 1861 with an original principal of $2,500 the in- 
terest (we use only simple interest instead of com- 
pound interest) for three and one-half years at 5%, 
amounts to $438. Assume that we invest the 
$2,500" in the leading stocks of 1861 at their average 
low price (as given in the preceding chapter) of 60, 
and hold the stocks for said 3 J years until the aver- 
age price reaches 160 in 1865, when we sell for 
$6,560, which together with the interest above 
mentioned makes a total of $6,998. We leave this 
amount on deposit in a bank for two years at 4%, 
so that we have $7,569 to invest in 1867 when the 
average again falls to 100. We think that with this 
introduction the table is self-explanatory. 

Original Principal invested 

@ 60% 1861 $ 2,500 

Dividends 3 \ yrs. @ 5% to 1865 $ 438 
Prin. bought @ 60-1861 

sold @ 160 ; ._ 1865 6,560 

Total of Prin. & Dividends 

@5% 1865 6,998 

Comp. Int. @ 4% 2 yrs. 

P. &I 1867 7,569 

Invested at 100 in 1867 . . . 

Dividends 2 yrs. @ 5% to 1869 756 



48 BUSINESS BAROMETERS 



Prin. bought @ 100-1867 

sold 160 1869 $12,000 

Total of Prin. and Divi- 
dends @ 5% 1869 $12,756 

Comp. Int. @ 4% 4 yrs. 

P. & 1 1873 14,920 

Invested at 75 in 1877 

Dividends 1 yr. @ 5% to 1874 746 

Prin. bought @ 75-1873 

sold® 110 1874 21,780 

Total of Prin. & Divs. @ 

5% to 1874 22,526 

Comp. Int. @ 4% 3| yrs. 

P. &I 1877 25,844 

Invested at 50 in 1877 

Dividends 4 yrs. @ 5% to 1881 5,168 

Prin. bought @ 50-1877 

sold @ 140 1881 72,240 

Total of Prin. and Divs. @ 

5% 1881 77,408 

Comp. Int. @ 4% 4 yrs. 

P. & 1 90,442 

Invested at 85 in 1885 

Dividends 4 yrs. @ 5% to 1889 18,108 

Prin. bought (a 85-1885 

sold @ 140 _ 1889 149,100 

Total of Prin. and Divs. @ 

5% 1889 167,208 

Compt. Int. @ 4% 1£ yrs. 

P. &I 1891 177,275 

Invested at 95 in 1891 

Dividends 1 yr. @ 5% to 1892 8,868 

Prin. bought (a 95-1891 

sold @ 140 1892 261,380 

Total of Prin. and Divs. @ 

5% 1892 270,248 

Comp. Int. @ 4% 5 yrs. 

P. &I 1897 328,794 

Invested at 100 in 1897 ... 

Dividends 6 yrs. @ 5% to 1903 98,634 

Prin. bought @ 100-1897 

sold @ 200 1903 657,400 

Total of Prin. & Divs. @ 

5% 1903 756,034 

Comp. Int. @ 4% 1 yr. 

P. & 1 1904 786,275 



POSSIBILITIES OF PROFIT 49 

Invested at 152 in 1904 . . . 
Dividends 3 yrs. @ 5% 

through Dec 1906 $117,939 

Prin. bought @ 152-1904 

sold @ 210 in Dec 1906 1,100,610 

Total of Prin. & Divs. @ 

5% through Dec 1906 $1,218,549 

Comp. Int. @ 4% 1 yr. to 

Dec. P. & 1 1907 1,267,291 

Invested at 119 in 1907. . . 
Divs. 1 yr. &8 mos. @ 5% 

to Aug 1909 105,600 

Prin. bought @ 119-1907 

sold @ 193 Aug.. 1909 2,055,330 

Total of Prin & Divs. @ 

5% through Aug 1909 2,160,930 

Comp. Int. @ 4% 2 yrs., 

4 mos., (P. & I.) to Jan. 1912 2,370,248 

In the above table 5% is allowed as an average 
dividend on the stocks held and 4% an average in- 
terest on bank deposits or the highest grade com- 
mercial paper. The average prices at which the 
purchases and sales are executed are the "averages" 
at the beginning of each of the paragraphs above 
on general stock prices. 

The preceding example shows that $2,500 con- 
servatively invested in a few standard stocks about 
forty-eight years ago would to-day amount to over 
$2,000,000. These not only are strictly investment 
stocks, but also are stocks which have fluctuated 
comparatively little in price. This, moreover, was 
possible by giving orders to buy or sell only once in 
every three or four years. 

If other stocks, which were not dividend payers, 
and which have shown greater fluctuations, were 
purchased, and advantage had been taken of the 
intermediate fluctuations, the $2,500 would have 
amounted to much larger figures. By intermediate 



50 BUSINESS BAROMETERS 

movements is not meant the weekly movements 
which the ordinary professional operator notes, 
but the broader movements extending over many 
months and possibly a year or more. Nevertheless, 
these broader intermediate movements should not 
be noticed by a conservative investor, as it is possi- 
ble to correctly diagnose only the movements extend- 
ing over longer periods. Many brokers believe that 
it is possible to discern also these intermediate 
movements of six or eight months; and if so the 
following results would have been possible. 

$5,000 invested in "St. Paul" in 1870 would 
amount to over $10,000,000 to-day. 

$5,000 invested in "Union Pacific" in 1870 would 
amount to over $15,000,000 to-day. 

$5,000 invested in "Central of New Jersey" 
would amount to over $30,000,000 to-day. 

$5,000 invested in "Northern Pacific" would 
amount to over $50,000,000 to-day. 

These figures are not based on the supposition 
that the investor was selling at the top of every rise 
or buying at the bottom of every decline ; but that 
the purchases were made at average "high" and 
average "low" prices, based upon the study of tech- 
nical conditions. 

If, however, the investor can in this way increase 
an investment of $5,000 to $1,000,000 in about 
thirty years without risk, he should be satisfied 
and should not, for the sake of obtaining greater 
profits, assume any additional risks. With this 
serving as a simple illustration of how money can 
be made by studying statistics, the following (from 



POSSIBILITIES OF PROFIT 51 

a letter written by the manager of a Stock Exchange 
House) is of interest as an. illustration of the other 
side: 

"Hearing on every hand about the fortunes made 
in Wall Street, I decided upon being graduated 
from college to devote myself to finance. With 
this end in view I secured a position with a first- 
class New York Stock Exchange House, finally be- 
coming the 'handshaker' for the firm — that is, 
'manager' of the customer's room. So I had an 
exceptional opportunity to size up the stock busi- 
ness. The chief duties of the manager are to meet 
customers when they visit the office ; tell them how 
the market is acting, the latest news from the news- 
tickers and the gossip of the Street. But the real 
duties are to get business for the house. 

"One day a most peculiar man came to the office. 
He was about forty-five years of age, dressed in a 
faded cutaway coat, high -water trousers and an 
East Side, low-crown, derby hat. In a high, 
squeaky voice he said that he knew our Milwaukee 
house and would like to open an account. Of course 
we were all smiles, for here was a new ' customer.' 

"One day while in Boston he called us up on 
the long distance telephone to make an inquiry 
about the grain market. One of my assistants, 
desiring to get a commission out of him, said, 'We 
hear that Southern Pacific is going up; you had 
better get aboard.' He answered, 'All right; buy 
me a hundred at the market.' The stock was 
bought, but he never saw daylight on his purchase, 
for the market declined steadily afterward, and by 



52 BUSINESS BAROMETERS 

the time he got back from Boston it showed a 
heavy loss. The man who had advised its pur- 
chase had no special knowledge about the stock, but 
simply took a chance, knowing that the market had 
only two ways to go, and it 'might' go up, in which 
case, besides making twenty-five dollars in com- 
missions for the house, he would be patted on the 
back for his good judgment. If the market went 
down, as it did, he would still make twenty-five 
dollars. 

"I venture to say that ninety-nine per cent, of 
the speculations on the New York Stock Exchange 
are based on such so-called 'Tips.' The manager 
has got to get the business to keep his posi- 
tion and salary, and this can only be done by 
'touting' people into the market. So he draws on 
the 'dope' sheets of the professional tipsters and 
his own feelings, and gives positive information to 
the bleating lamb that the Standard Oil is putting 
up St. Paul, or that Harriman is 'bulling' Union 
Pacific. The lamb buys the stock, the broker gets 
the commission and then the lamb worries his heart 
out as he sees his one-thousand-dollar margin jump- 
ing around in value. Now it has increased to 
eleven hundred dollars, then declined to nine hun- 
dred and fifty dollars, then nine hundred dollars, 
eight hundred dollars, and then back to eight 
hundred and fifty dollars, and then it takes the 
'toboggan' to three hundred dollars, upon which 
the broker calls for margins, and sells the cus- 
tomer out if they are not forthcoming, the whole 
speculation being based on the manager's 'feeling' 
that stocks ought to go up. 



POSSIBILITIES OF PROFIT 53 

"Men of affairs who will not play poker at home, 
and are shocked at the mention of faro and roulette, 
which any old-timer will tell you are easier to beat 
than the stock market, think they are using business 
judgment when they try to make money on stock 
market 'tips.' 

"Anyone with common-sense can see that a ten- 
point margin has no more chance in an active mar- 
ket than a brush dam in a Jamestown flood. One 
of the causes for this kind of speculating on a mar- 
gin is that a broker's commission is only 12J cents 
per share, and it does not pay to do small-lot busi- 
ness. The one-thousand-dollar margin would only 
buy ten shares outright and net the broker but $1.25 
for buying and $1.25 for selling, whereas that same 
amount as margin on one hundred shares yields the 
broker $12.50 each way, besides interest on the 
balance, the net result being that for any given 
amount of money a speculator on ten-point margin 
multiplies his profits by ten and his losses by ten 
over those that would occur were he to buy the 
stock outright and take it home. The broker on 
his side multiplies his commission by ten over what 
he would receive were he to do an investment busi- 
ness." For further proofs as to the foolhardiness 
of the average so-called "investor" in stocks see 
the series of articles in Everybody' s Magazine that 
appeared during the spring of 1909. Such a 
method of buying and selling stock is absolutely 
unreliable; and unless men are willing to spend 
money for fundamental statistics, they should pur- 
chase no listed securities, but confine their pur- 



54 BUSINESS BAROMETERS 

chases to inactive bonds recommended by high 
grade bond houses. 

On the other hand, it is possible to create a for- 
tune by the method that is herein outlined, although 
it is practically the only method which can be de- 
pended upon. It is also the most profitable, as all 
other methods come under the head of "accumula- 
tion by arithmetical progression" rather than "ac- 
cumulation by geometrical progression." 

In order to increase an investment of $5,000 to 
$1,000,000 in thirty years by any other method, 
a man must accumulate about $25,000 a year, or 
$100,000 continually every four years, without a 
break. This is almost an impossibility so far as 
the average man is concerned and the feat is simply 
made greater or less in direct proportion to the 
amount. That is, to build up a fortune of $200,000 
requires a laying aside of several thousand dollars 
every year in addition to allowing all interest to 
accumulate; while to create a fortune of several 
millions requires that one should make, exclusively 
in his business, more money each year than almost 
any one man in the entire world who holds no 
stocks or bonds is making in his business to-day. 

This can best be illustrated as follows: — If one 
has $1,000 invested in only ten shares of stock, it 
does not seem very wonderful for it to double in 
value in three or four years, enabling its sale for 
$2,000, which is at a profit of $1,000. This is due 
to the fact that one is accustomed to the thought 
of handling $1,000; yet with $100,000 in the same 
stock, it would just as surely become $200,000, 
giving a profit of $100,000. 



POSSIBILITIES OF PROFIT 55 

In other words, at the beginning there is little 
difference between "Arithmetical" and "Geomet- 
rical" Progression, as $1,000 added to $1,000 
amounts to $2,000, the same as if multiplied by 
two. After accumulating $100,000, however, it 
makes a tremendous difference whether one adds 
$1,000, making the amount $101,000 or multiplies 
said amount by two, making the amount $200,000. 
It is for this reason, that it is not only possible 
to create a great fortune through conservative 
investments, but this is the safest way it can be 
accomplished. 

The Possibilities of Profits in Bonds 

For the benefit of readers who confine their pur- 
chases strictly to bonds, the following tables will 
be found of great interest. Although bonds do 
not present nearly as great an opportunity for 
profit as stocks, yet it will be seen that there is often 
an opportunity of obtaining an average profit of from 
10% to 20% in addition to the interest received. 

From every point of view a study of these tables 
clearly shows that the study of fundamental sta- 
tistics is of great value even to the banker or in- 
vestor who purchases only bonds. If he buys with 
the idea of selling again, a study of fundamental 
statistics is absolutely essential. If one buys for 
permanent investment only, the study is not es- 
sential; but by showing a purchaser when to buy, 
fundamental statistics will save him an average of 
about 12% on all purchases. In order that the 



56 BUSINESS BAROMETERS 

reader may not think that these tables were pre- 
pared by us merely in the interests of the study 
of fundamental statistics we take pleasure in stat- 
ing that they were prepared by a leading New York 
investment house whose natural object would be to 
show that bonds fluctuate very little. 






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REORGANIZATIONS 63 

As some readers will say, ''These figures are all 
very well, but one might have bought some se- 
curities which defaulted," the following tables, 
prepared by Mr. J. D. Evans, and appearing in one 
of the many valuable financial articles published 
by the Van Norden Magazine, are extremely in- 
structive. Of course one may invest in new schemes 
and lose all the money invested; but if one will con- 
fine his investments to securities of established 
railroads, he has nothing to fear from a reorganiza- 
tion. 

Without any noteworthy exceptions the reor- 
ganizations have been carried out with the inten- 
tion of placing the companies in a position of solid- 
ity and strength with respect to their fixed obli- 
gations, on the low basis of business as it existed 
at that time. To accomplish this the stockholders 
and owners of the junior securities of the bank- 
rupt companies were induced to forego a large 
part of their immediate income from their in- 
vestments and take their chances of larger returns 
with the growth of the companies. With the ob- 
ject of making these chances as bright as possible, 
the reorganization committees were almost in- 
variably quite liberal to the holders of such obli- 
gations in their allotment of new securities, espe- 
cially to such of the old holders as paid the assess- 
ments necessary to provide the new capital re- 
quired. 

In the tables presented no attempt is made to 
include all possible obligations of all reorganized 
companies. No one would be justified in pre- 



64 BUSINESS BAROMETERS 

tending that absolutely exact general conclusions 
can be arrived at from any statistical tables made 
up in a study of reorganizations, since no two bonds 
issued under different indentures are exactly alike. 
Therefore only a few typical representatives of the 
various kinds of bond issues affected by reorgani 
zations are grouped together in the main table and 
these are then segregated into smaller groups includ- 
ing securities as nearly in the same class as possible. 
Such general conclusions, arrived at as a result of 
such a plan, are, however, more valuable than 
they would be in the other case, inasmuch as typical 
securities of typical companies have been taken, 
representing all parts of the country. 

"The conservative investor who makes it a 
practice to buy only the best class of first mortgage 
bonds with the purpose of ensuring the safety of 
his principal and the continuity of his income, needs 
only the most casual acquaintance with the out- 
come of reorganizations to convince him that he 
has plenty of proof that his stand is a wise one. 

"By far the larger proportion of first lien bonds 
were not disturbed at all either in their lien or rate 
of interest. In reality their position was greatly 
strengthened by the financial readjustment and the 
accretion of fresh capital to assure the continuance 
and success of the company on whose property they 
had a prior lien. The fact that there are still out- 
standing a considerable number of old underlying 
bonds of reorganized companies selling at premiums 
ranging from 10 per cent, to 30 per cent, or 40 
per cent, is the best evidence of this. 






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II 



REORGANIZATIONS 71 

"There were a few prior mortgage bonds which 
had their interest rate reduced while otherwise un- 
disturbed, but the best grade bonds that were 
disturbed fared approximately as indicated in 
Table B. 

"As shown in Table B, the principal on the 
old first mortgage bonds disturbed was not only 
conserved but increased an average of 33.3 per 
cent, as compensation for a reduction in the return 
on each dollar. This in itself has been a decided 
advantage inasmuch as the old mortgages, if they 
had been left to mature, would, at maturity, be 
redeemed at par or extended on a basis of 4 per 
cent, or less, whereas the average holder of old 
disturbed firsts, now has well secured principal 
greater by 33.3, the whole probably yielding him a 
4 per cent rate. 

"This outcome places him on a level with the 
holder of an undisturbed first mortgage having a 
high rate of interest and a long period to run which 
on account of the subsequent enhancement of the 
credit of the company commands a price of 133.3 
per cent. 

"The table also shows that the average reduction 
in immediate return on the bonds included was 
very slight, being only from an average return of 
5.1 per cent, to 4.997 per cent. The rate later in- 
creased to 5.097 and there is a fair prospect that in 
the reasonably near future it may reach 5.197 per 
cent, and ultimately may attain to an appreciably 
higher figure. 

"Thus the buyer of the first mortgages found him- 



72 BUSINESS BAROMETERS 

self more than justified in his practice, in that the 
average holder instead of merely conserving his 
principal, received a new principal 133.3 per cent, 
of the old, and although the return was cut down at 
first the cut was very slight and after a comparative 
few years the return was restored to about the 
original rate with every reasonable prospect of 
eventually becoming greater. 

"Of the second, third or fourth grade bonds se- 
cured on main properties or low grade divisional 
and branch line bonds, which follow in their re- 
spective tables, each class received a correspond- 
ingly severe cut in both their immediate and pro- 
spective return. 

"Some typical miscellaneous bonds fared as 
shown in Table G. 

"It might be laid down as a general rule that 
Equipment Trust mortgages were always favorably 
treated. The treatment of Collateral Trust bonds 
varied of course materially, depending on the qual- 
ity of the collateral pledged. Yet it is interesting to 
observe, in view of the recent adverse discussion of 
bonds secured by pledge of collateral, that the great 
majority of bonds of that class were either paid off 
at par and all accrued interest either by the new 
company directly, or as a result of the liquidation 
of the pledged collateral, or were given new se- 
curities to full amount of principal, the income 
from which represented a reduction of only a small 
proportion of the old income." 

That this was the case was nothing short of re- 
markable considering the depression in the prices 



REORGANIZATIONS 73 

of all securities at that time and the difficulty of 
obtaining any market for even the best of bonds or 
stocks, while the collateral pledged under bonds 
involved in reorganizations usually represented 
obligations of concerns which shared in the bank- 
rupt condition of the parent company. 

The average non-mortgage debenture or the 
average terminal bond probably fared as per Table 
G, with a preference in favor of terminal bonds. 

To the more speculative investor also, whose 
preference runs to stocks, the outcome of reorgani- 
zations should be of interest. There is much in the 
subjoined table (H) well worth notice both as call- 
ing attention to the success attending the subsequent 
development of the reorganized companies and as 
a commentary on the actual prosperity enjoyed 
by the companies in the period elapsed since 1896 — - 
a prosperity perhaps beyond all expectations of 
even the reorganizers. 

Table H shows that the average return on the 
average of the most junior securities issued, shows 
a rate of return on the par value of the old junior 
securities which approximate, very closely at the 
present time, and promises soon to equal and even- 
tually far to exceed the return on the original par 
value of the very best grade of bonds. The signifi- 
cance of this is enhanced when we recollect that 
whereas the old first mortgage bonds probably re- 
mained at a price which averaged near par even 
when in default, and could probably never have 
been purchased by the investor at much less than 
that figure, the stocks of the old companies prob- 



74 BUSINESS BAROMETERS 

ably had an average price for a considerable time 
before reorganization of not over 50 per cent., and 
for a very long time many sold as low as 10 per 
cent., so that a purchaser who bought those se- 
curities at those prices and held the new securities 
issued in exchange, is actually receiving from two to 
ten times more return on his investment than an 
investor in the old first mortgage bonds. This 
outcome was, of course, preceded by a period in 
which there was practically no return, but that 
period was very short. 

The table on the opposite page summarizing 
the tables already given is appended for the 
purpose of giving the reader a more ready com- 
parison. 

There is still another lesson to be learned from 
these tables which should be most carefully remem- 
bered by such as look down upon the principle of 
buying and selling every one to four years, outlined 
in this book. We refer to the fact that those most 
"conservative" investors and trustees, who buy 
only for permanent investment, can still well afford 
to study fundamental statistics. 

Whether or not they ever intend to sell, they 
should confine their buying to times when funda- 
mental statistics show that underlying conditions 
are becoming sound. This last is very important, 
as it is a great mistake to buy simply because prices 
are low. 

Investors, if students of fundamental statistics, 
can well afford to purchase defaulted bonds and 
other securities of established railroads in the proc- 



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76 BUSINESS BAROMETERS 

ess of reorganization and make tremendous profits 
thereby, provided they are willing to study funda- 
mental statistics; or ; to state it in another way, they 
can purchase at 50, bonds which, during normal 
times after the reorganization is completed, they 
would otherwise purchase at 110. 




CHART SHOWING PRICES OF LEADING C ^ ™™^ ^Iho" to changes in the Stock 
. above plots show the fluctuation in the prices of commodities and also «e>t mat-on s, ^^ 

lots A and B are duplicates and show the main movements of the Stock Market since leou 



I Coffee, (9) Rubber, (10) Sugar 



Market P lots A and ! 

ate f * '$" $K&> cErTw Cotton (4) Pig Iron. (5) Pork, (6) Copper (7) Wool (8) Coflee <v, -^-^broken 

f ° r ^ 11 Vh^c^mJdttrprlcP were so seriously affected by th e war they are not used ^r «u d^^a.y tica.l^nnUb 
Dam„ c 1S7J reduced commodities to a normal state. BesinninS with this depression, we have marra in_ = J 

** Aort «olW vertical lines and the high points with shor "ottld vertical lines. There are two points of vital West 
to n in connection with this plot, as follows:— - 

?a\ Commodity prices have always fallen and risen with every cycle of the Stock Market. Mark et reaches 

)l\ Commodity prices reach their low point and their high po^ about two years af ^ ' w» motioned. M 
Its ] (b hi gh point respectively. This latter is shown ven-graphicallv bv the short vertical lines above mentions 



CHAPTER III 

RANGE OF COMMODITY MARKET SINCE 1860, 
SHOWING THE POSSIBILITIES OF PROFIT 
TO MERCHANTS AND BANKERS. SPECIAL 
TABLES ON COMMODITY PRICES. 

A KNOWLEDGE of Fundamental Statistics 
is as important to merchants and manufac- 
turers as to investors. The commodity 
market offers almost as great an opportunity for 
profit as the stock market. Capital invested in 
commodities should not depend upon chance for its 
development. To - the merchant or any one else 
interested wholly or in part in the price movement 
of crops, manufactures, raw material or merchan- 
dise, general figures on underlying conditions, con- 
trolling demand and supply, are essential. 

To know when to buy and when to sell commodi- 
ties, in order to take advantage of the larger swings 
of the market, the merchant must know what the 
present conditions are and which way the pendu- 
lum is swinging. To know how soon to curtail 
credits extended to customers, and acquire the cash 
needed to save his credit, when loans cannot easily 
be renewed, he must watch the Composite Plot. 
Keeping his eyes only on the details of his own 
business will not enable him to avoid "hard 
times." Moreover, by broadening his study he is 
able greatly to increase his profits, as well as to 
eliminate losses. 



78 BUSINESS BAROMETERS 

The study of twenty-five important factors like 
those described in subsequent chapters of this book, 
by methods similar to those there outlined, results 
in the perception of clearly defined industrial 
movements in the past and shows the bearing these 
factors are having to-day in commerce and in- 
dustry, as well as on the monetary and stock mar- 
ket outlook. Great fortunes have been made, the 
history of which reveals the fact that their possessors 
had a very accurate knowledge of approaching con- 
ditions, because of a keen understanding of funda- 
mental statistics. 

As an illustration of possible profits that can be 
made simply by the purchase and sale of commodi- 
ties in connection with a study of Fundamental 
Statistics, the following problem is submitted. 
Starting with a capital of a little over fifty thousand 
dollars, ten commodities were selected for pur- 
chasing. Bought first in 1860, they were sold 
and bought again at intervals of from three to 
seven years, according to what the figures on 
"underlying conditions" indicated. The prices 
used are those given in the closing paragraphs of 
this chapter and no departure from the years se- 
lected was made, except where there was a choice 
of either of two years. In such cases, it was assumed 
that the purchaser would buy later, sell earlier, or 
leave more cash on deposit as the conditions war- 
ranted. The original proportion of the different 
articles has been kept the same; and the interest, 
added to the principal on deposit in the intervals 
between buying and selling, has been reckoned at 



RANGE OF COMMODITY MARKET 79 

4%. Since all commodities are not affected alike 
by the same conditions, slight losses were allowed 
to occur as they would naturally. The resulting 
amount shows that in about fifty years $53,755 
becomes about $900,000; or that $1,000,000 would 
become $16,000,000. By working a similar prob- 
lem with a single commodity a very much greater 
profit would have been possible. Thus, if $53,000 
was invested in iron in 1860, it would have equalled 
to-day about $2,000,000. This clearly demonstrates 
that even the great mercantile fortunes have been 
acquired by taking advantage of the same laws 
and changes that give opportunities of profit to the 
banker and the investor. 

PROBLEM ILLUSTRATING PROFITS DERIVED 
FROM TRANSACTIONS IN COMMODITIES 
USING FUNDAMENTAL STATISTICS AS A 
GUIDE WHEN TO BUY AND SELL, 1860 TO 1911 

Basis: 1,000 tons iron; 5,000 bushels wheat. 
5,000 bushels corn; 10,000 lbs. cotton; 10,000 lbs. 
sugar; 10,000 lbs. wool; 10,000 lbs. coffee; 1,000 lbs. 
rubber; 500 barrels pork; 10,000 lbs. copper. 

PRICES SAME AS IN TABLES FOLLOWING 

Original Purchase 1860 . . . $53,755 . 10 

First Sales 1864 132,623 .25 

Capital on dep. 3 yrs. @ 

4% simp. int. P & I 1867 148,538.04 

Second Purchase 1868 $145,746.33 

Sales ( + 8-9) 1872 168,198.00 

Int. on $2,792.71 @ 4% 

P&I1872 3,351.25 

Amt. of capital after 2nd 

transaction 171,549.25 



08 
50 


$205,859.10 


06 






291,852.56 




315,200.76 



80 BUSINESS BAROMETERS 



Capital on deposit 5 yrs. 

4%P &I 1877 

Third Purchase 1878 $202,942 

Sales ( +4.9) 1882 288,585 

Int. on $2,917.02 3 yrs. @ 

4%P&I1882 3,267 

Amt. of capital after 3rd. 

transaction 

Capital on dep. 2 yrs. 4% 

P & I 1884 

Fourth Purchase 1885 3 14,448 . 00 

Sales ( + 8) 1892 338,746.00 

Int. on $752.76 7 yrs. 4% 

P&I1892 963.53 

Amount of capital after 4th 

^ transaction 339,709 . 93 

Capital on dep. 3 yrs. @ 

4%P&I1896 -380,475.12 

Fifth Purchase 1896 377,907.20 

Sales 1902 574,745.60 

Int. $2,567.92 6 yrs. 4% 

P&I1902 3,184.22 

Amount of capital after 5th 

transaction 577,929.82 

Capital on deposit year 4% 

P&I1904 601,047.12 

Sixth Purchase 1904 600,315 .00 

Sales 1907 770,928.62 

Int. on $732,013 yrs. P &I 819.85 

Amount of capital after 6th 

transaction 771,748.47 

Seventh Purchase 1908 . . . 766,829 . 72 

Sales in winter 1909-1910 

( + 8) 840,265.20 

Int. on $4,918.75 2 yrs. P & 

I 1910 5,312.25 

Amount of capital on de- 
posit January 1, 1911 . . . 870,945.00 
Comp. Amt. of capital @ 

4% to Jan. 1, 1912 .... 905,782.80 



When one realizes that if a capital of $50,000 
could have been increased to about $900,000 in less 
than fifty years, simply by a study of fundamental 
statistics and without borrowing any money or pur- 
chasing any but suitable commodities, the great 



RANGE OF COMMODITY MARKET 81 

value of this subject to the merchant becomes 
evident. This moreover can be accomplished 
without any salesman, overhead charges, or other 
expenses. If to these figures we should add the 
natural profit derived from buying at wholesale 
and selling at retail, or an average manufacturing 
profit, the $50,000 would become nearly $20,000,- 
000. Thus a capital of $2,500 would accrue to over 
$1,000,000 by combining either the manufacturer's 
or retailer's profit with a knowledge of funda- 
mental statistics. 

In addition to the value of Fundamental Statistics 
for determining the trendof demand, supply, andprices, 
they are of even more value for determining the amount 
of credit which manufacturers and merchants should 
at any time extend to customers; but as their use in 
connection with "credits" is so well understood, no 
detailed explanation is given in this book. 

1H PRICES OF TEN STAPLE COMMODITIES. 
AVERAGE WHOLESALE PRICE FROM 1860-1909. 

1860 

Wheat $1.37 per bu.; corn $0.73 per bu.; cotton 
$0.11 per lb.; sugar $0.0988 per lb.; wool $0.55 
per lb.; iron $22.70 per ton; copper $0.2287 per lb.; 
rubber $0.55 per lb.; pork $20.00 per bbl.; coffee 
$0.1306 per lb. 

1861 

Wheat $1.30 per bu.; corn $0.60 per bu.; cotton 
$0.1301 per lb.; sugar $0.08| per lb.; wool $0.38 
per lb.; iron $20.26 per ton; copper $0.2225 per lb.; 



82 BUSINESS BAROMETERS 

rubber $0.55 per lb.; pork $21.00 per bbl.; coffee 
$0.1275 per lb. 

1862 

Wheat $1.28 per bu. ; corn $0.59f per bu. ; cotton 
$0.3129 per lb.; sugar $0.11| per lb.; wool $0.48 
per lb.; iron $23.92 per ton; copper $0.2187 per lb.; 
rubber $0.48 per lb.; pork $12.25 per bbl.; coffee 
$0,205 per lb. 

1863 

Wheat $1.16 per bu.; corn $0.84 per bu.; cotton 
$0.6721 per lb.; sugar $0.14i per lb.; wool $0.75 
per lb.; iron $35.24 per ton; copper $0.3387 per lb.; 
rubber $0.87^ per lb.; pork $18.50 per bbl.; coffee 
$0.2965 per lb. 

1864 

Wheat $2.01 per bu.; corn $1.44i per bu.; cotton 
$1,015 per lb.; sugar $0.25 A per lb.; wool $1.00 
per lb.; iron $59.22 per ton; copper $0.47 per lb.; 
rubber $0.80 per lb.; pork $44.00 per bbl.; coffee 
$0.3775 per lb. 

1865 

Wheat $2.04 per bu.; corn $1.26J per bu.; cotton 
$0.8338 per lb.; sugar $0.21f per lb.; wool $0.75 
per lb.; iron $46.08 per ton; copper $0.3925 per lb.; 
rubber $1.20 per lb.; pork $38.00 per bbl.; coffee 
$0.2537i per lb. 

1866 

Wheat $2.20 per bu.; corn $0.90 per bu.; cotton 
$0,432 per lb.; sugar $0.16 J per lb.; wool $0.70 per 
lb.; iron $46.84 per ton; copper $0.3425 per lb.; 
rubber $1.00 per lb.; pork $34.00 per bbl.; coffee 
$0.1718 per lb. 



RANGE OF COMMODITY MARKET 83 



Wheat $3.33 per bu.; corn $1.21 per bu.; cotton 
$0.3159 per lb.; sugar $0.15} per lb.; wool $0.55 
per lb.; iron $44.08 per ton; copper $0.2537 per lb.; 
rubber $0.65 per lb.; pork $24.50 per bbl.; coffee 
$0.16 per lb. 

1868 

Wheat $2.43 per bu.; corn $1.23 per bu.; cotton 
$0.2485 per lb.; sugar $0.16^ per lb.; wool $0.46 
per lb.; iron $39.25 per ton; copper $0.23 per lb.; 
rubber $0.67^ per lb.; pork $30.00 per bbl.; coffee 
$0,115 per lb. 

1869 

Wheat $1.50 per bu.; corn $1.02f per bu.; cotton 
$0.2901 per lb.; sugar $0.16 A per lb.; wool $0.48 
per lb.; iron $40.61 per ton; copper $0.2425 per lb.; 
rubber $0.82 per lb.; pork $34.00 per bbl.; coffee 
$0.0931 per lb. 

1870 

Wheat $1.30 per bu.; corn $1.02 per bu.; cotton 
$0.2398 per lb.; sugar $0.13J per lb.; wool $0.46 
per lb.; iron $33.23 per ton; copper $0.2118 per lb.; 
rubber $1.00 per lb.; pork $30.50 per bbl.; coffee 
$0.10 per lb. 



$0.10 per lb. 

1871 



1871 

Wheat $1.60 per bu.; corn $0.77 per bu.; cotton 
$0.1695 per lb. ; sugar $0.13^ per lb. ; wool $0.62 per 
lb. ; iron $35.08 per ton ; copper $0.2412 per lb. ; rub- 
ber $1.00 per lb.; pork $23.00 per bbl.; coffee $0.1375 
per lb. 

1872 
Wheat $1.62 per bu.; corn $0.70 per bu.; cotton 



84 BUSINESS BAROMETERS 

$0.2219 per lb.; sugar $0.12f per lb.; wool $0.72 
per lb. ; iron $48.94 per ton ; copper $0.3556 per lb. ; 
rubber $0.72^ per lb.; pork $16.00 per bbl.; coffee 
$0.1631 per lb. 

1873 

Wheat $1.76 per bu.; corn $0.63 per bu.; cotton 
$0.2014 per lb.; sugar $0.11| per lb.; wool $0.50 
per lb.; iron $42.79 per ton; copper $0.28 per lb.; 
rubber $0.74 per lb.; pork $18.00 per bbl.; coffee 
$0.1862 per lb. 

1874 

Wheat $1.39 per bu.; corn $0.86 per bu.; cotton 
$0.1795 per lb.; sugar $0.10 T V per lb.; wool $0.53 
per lb.; iron $30.19 per ton; copper $0.22 per lb.; 
rubber $0.75 per lb.; pork $24.75 per bbl.; coffee 
$0.2625 per'lb. 

1875 

Wheat $1.33 per bu.; corn $0.84 per bu.; cotton 
$0.1546 per lb.; sugar $0.10r6 per lb.; wool $0.52 
per lb.; iron $25.53 per ton; copper $0.2268 per lb.; 
rubber $0.58^ per lb.; pork $23.50 per bbl.; coffee 
$0.1806 per lb. 

1876 

Wheat $1.35 per bu. ; corn $0.62 J per bu. ; cotton 
$0.1298 per lb. ; sugar $0.10| per lb. ; wool $0.38 per 
lb.; iron $22.19 per ton; copper $0.21 per lb.; rubber 
$0.64 per lb. ; pork $22.75 per bbl. ; coffee $0,175 per 
lb. 

1877 

Wheat $1.63 per bu. ; corn $0.59J per bu. ; cotton 
$0.1182 per lb.; sugar $0.11tV per lb.; wool $0.50 
per lb.; iron $18.92 per ton; copper $0.19 per lb.; 



RANGE OF COMMODITY MARKET 85 

rubber $0.58 per lb.; pork $17.95 per bbl.; coffee 
$0.1943 per lb. 

1878 

Wheat $1.24 per bu.; corn $0.53J per bu.; cotton 
$0.1122 per lb.; sugar $0.09 T V per lb.; wool $0.36 
per lb.; iron $17.67 per ton; copper $0.1656 per lb.; 
rubber $0.49 per lb.; pork $11.35 per bbl.; coffee 
$0.1385 per lb. 

1879 

Wheat $1.24 per bu.; corn $0.47 per bu.; cotton 
$0.1084 per lb.; sugar $0.08f per lb.; wool $0.37 
per lb.; iron $21.72 per ton; copper $0.1862 per lb.; 
rubber $0.51 per lb.; pork $13.75 per bbl.; coffee 
$0.1387 per lb. 

1880 

Wheat $1.30 per bu.; corn $0.55 per bu.; cotton 
$0.1151 per lb.; sugar $0.09+1 per lb.; wool $0.46 
per lb.; iron $28.48 per ton; copper $0.2143 per lb.; 
rubber $0.81 per lb.; pork $19.00 per bbl.; coffee 
flO.ISnerlh. 



).15perlb 

1881 



1881 

Wheat $1.30 per bu.; corn $0.62 per bu.; cotton 
$0.1203 per lb.; sugar $0.09| per lb.; wool $0.42 
per lb.; iron $25.17 per ton; copper $0.1818 per lb.; 
rubber $0.76 per lb.; pork $20.00 per bbl.; coffee 
$0.1212 per lb. 

1882 

Wheat $1.32 per bu.; corn $0.77 per bu.; cotton 
$0.1156 per lb.; sugar $0.09^ per lb.; wool $0.42 
per lb.; iron $25.77 per ton; copper $0.1912 per 
lb.; rubber $0.87 per lb.; pork $24.75 per bbl.; 
coffee $0.0975 per lb. 



86 BUSINESS BAROMETERS 

1883 

Wheat $1.17 per bu.; corn $0.64 per bu.; cotton 
$0.1188 per lb.; sugar $0.08| per lb.; wool $0.39 per 
lb.; iron $22.42 per ton; copper $0,165 per lb.; 
rubber $0.07 per lb.; pork $20.15 perbbl.; coffee 
$0.0931 per lb. 

1884 

Wheat $1.00 per bu.; corn $0.61J per bu.; cotton 
$0.1098 per lb.; sugar $0.06| per lb.; wool $0.35 
per lb.; iron $19.81 per ton; copper $0.13 per lb.; 
rubber $0.96 per lb.; pork $19.50 per bbl.; coffee 
$0.1062 per lb. 

1885 

Wheat $0.94 per bu.; corn $0.51 per bu.; cotton 
$0.1045 per lb.; sugar $.06| per lb.; wool $0.32 per 
lb.; iron $17.99 per ton; copper $0.1083 per lb.; 
rubber $0.56 per lb.; pork $13.25 per bbl.; coffee 
$0.09 per lb. 

1886 

Wheat $0.88J per bu. ; corn $0.52^ per bu. ; cotton 
$0.0928 per lb.; sugar $0.0653 per lb.; wool $0.33 
per lb.; iron $20.93 per ton; copper $0.1385 per lb.; 
rubber $0.61 per lb.; pork $12.20 per bbl.; coffee 
$0,095 per lb. 

1887 

Wheat $0.88 per bu.; corn $0.48f per bu.; cotton 
$0.1021 per lb.; sugar $0.0623 per lb.; wool $0.34 
per lb.; iron $20.93 per ton; copper $0.1385 per lb.; 
rubber $0.76 per lb.; pork $24.00 per bbl.; coffee 
$0.1684 per lb. 

1888 

Wheat $0.94 per bu.; corn $0.59£ per bu.; cotton 



RANGE OF COMMODITY MARKET 87 

$0.1003 per lb.; sugar $0.0602 per lb.; wool $0.29 
per lb.; iron $18.88 per ton; copper $0.1677 per lb.; 
rubber $0.76 per lb.; pork $16.00 per bbl.; coffee 
$0.1581 per lb. 

1889 

Wheat $0.91 per bu. ; corn $0.43f per bu. ; cotton 
$0.1065 per lb.; sugar $0.0718 per lb.; wool $0.35 
per lb.; iron $17.76 per ton; copper $0.1349 per 
lb.; rubber $0.74 per lb.; pork $13.37^ per bbl.; 
coffee $0.1765 per lb. 

1890 

Wheat $0.92 per bu.; corn $0.48J per bu.; cotton 
$0.1107 per lb.; sugar $0.0789 per lb.; wool $0.33 per 
lb.; iron $18.41 per ton; copper $0,156 per lb.; 
rubber $0.80 per lb.; pork $13.62J per bbl.; coffee 
$0.1793 per lb. 

1891 

Wheat $1.05 per bu.; corn $0.67 J per bu.; cotton 
$0,086 per lb.; sugar $0.0627 per lb.; wool $0;31 per 
lb.; iron $17.52 per ton; copper $0.1276 per lb.; 
rubber $0.78 per lb.; pork $13.00 per bbl.; coffee 
$0.1671 per lb. 

1892 

Wheat $0,908 per bu. ; corn $0.54 per bu. ; cotton 
$0.0771 per lb.; sugar $0.0465 per lb.; wool $0.28 
per lb.; iron $15.75 per ton; copper $0.1156 per lb.; 
rubber $0.6763 per lb.; pork $15.05 per bbl.; coffee 
$0.1430 per lb. 

1893 

Wheat $0,739 per bu. ; corn $0,499 per bu. ; cotton 
$0.0856 per lb.; sugar $0.0435 per lb.; wool $0.24 
per lb.; iron $14.52 per ton; copper $0.1075 per lb.; 



BUSINESS BAROMETERS 



rubber $0.7167 per lb.; pork $21.80 per bbl.; coffee 
$0.1723 oer lb. 



$0.1723 per lb. 

1894 



18^4 

Wheat $0,611 per bu. ; corn $0,509 per bu. ; cotton 
$0.0694 per lb.; sugar $0.0484 per lb.; wool $0.20 
per lb.; iron $12.66 per ton; copper $0.0952 per lb.; 
rubber $0.6744 per lb.; pork $14.57| per bbl. ; coffee 
$0.1654 per lb. 

1895 

Wheat $0,669 per bu.; corn $0,477 per bu.; 
cotton $0.0744 per lb.; sugar $0.0412 per lb.; wool 
$0.18 per lb.; iron $13.10 per ton; copper $0.1053 
per lb.; rubber $0.7425 per lb.; pork $12.87J per 
bbl.; coffee $0.1592 per lb. 
1896 

Wheat $0,781 per bu. ; corn $0,340 per bu. ; cotton 
$0.0793 per lb.; sugar $0.0412 per lb.; wool $0.17 
per lb.; iron $12.95 per ton; copper $0.1098 per lb.; 
rubber $0.80 per lb.; pork $10.85 per bbl.; coffee 
$0.1233 per lb. 

1897 

Wheat $0,954 per bu. ; corn $0,319 per bu. ; cotton 
$0.07 per lb.; sugar $0.0453 per lb.; wool $0.21 per 
lb.; iron $21.10 per ton; copper $0.1136 per lb.; 
rubber $0.8454 per lb.; pork $9.00 per bbl.; coffee 
$0.0793 per lb. 

1898 

Wheat $0,952 per bu. ; corn $0,376 per bu. ; cotton 
$0.0594 per lb.; sugar $0,045 per lb.; wool $0.28 per 
lb.; iron $11.66 per ton; copper $0.1205 per lb.; 
rubber $0.9271 per lb.; pork $12.30 per bbl.; coffee 
$0.0633 per lb. 



RANGE OF COMMODITY MARKET 89 

1899 

Wheat $0,794 per bu. ; corn $0,413 per bu. ; cotton 
$0.0688 per lb.; sugar $0.0497 per lb.; wool $0.29 
per lb.; iron $19.36 per ton; copper $0.1776 per lb.; 
rubber $0.9954 per lb.; pork $10.45 per bbl.; coffee 
$0.0604 per lb. 

1900 

Wheat $0,804 per bu.; corn $0,453 per bu.; 
cotton $0.0925 per lb.; sugar $0.0492 per lb.; wool 
$0.28i per lb.; iron $19.98 per ton; copper $0.1665 
per lb. ; rubber $0.9817 per lb. ; pork $16.00 per bbl. ; 
coffee $0.0822 per lb. 

1901 

Wheat $0,803 per bu. ; corn $0,567 per bu. ; cotton 
$0.0875 per lb.; sugar $0.0532 per lb.; wool $0.25 
per lb.; iron $15.87 per ton; copper $0.1672 per lb.; 
rubber $0.8496 per lb.; pork $16.80 per bbl.; coffee 
$0.0646 per lb. f* 

1902 

Wheat $0,836 per bu. ; corn $0,684 per bu. ; cotton 
$0.09 per lb.; sugar $0.0505 per lb.; wool $0.26 per 
lb.; iron $22.19 per ton; copper $0.1216 per lb.; rub- 
ber $0.7273 per lb.; pork $18.70 per ton; coffee 
$0.0568 per lb. 

1903 

Wheat $0,853 per bu.; corn $0,372 per bu.; cotton 
$0.1118 per lb.; sugar $0.0446 per lb.; wool $0.31* 
per lb. ; iron $19.91 per ton; copper $0.1372 per lb. ; 
rubber $0.9054 per lb.; pork $18.37 per bbl.; coffee 
$0.0559 per lb. 

1904 

Wheat $1,107 per bu.; corn $0,594 per bu.; cotton 



90 BUSINESS BAROMETERS 

$0.1175 per lb. ; sugar $0.0464 per lb. ; wool $0.32i per 
lb.; iron $15.57 per ton; copper $0.1301 per lb.; 
rubber $1.0875 per lb.; pork $16.58 per bbl.; coffee 
$0.0782 per lb. 

1905 

Wheat $1,028 per bu. ; corn $0,593 per bu. ; cotton 
$0,098 per lb.; sugar $0.0477 per lb.; wool $0.36 
per lb.; iron $17.88 per ton; copper $0.1589 per lb.; 
rubber $1.2425 per lb.; pork $16.50 per bbl.; coffee 
$0.0832 per lb. 

1906 

Wheat $0,865 per bu.; corn $0.56 per bu.; cotton 
$0,115 per lb.; sugar $0.0526 per lb.; wool $0.33 
per lb.; iron $20.98 per ton; copper $0.1961 per 
lb.; rubber $1.2131 per lb.; pork $20.00 per bbl.; 
coffee $0.0811 per lb. 

1907 
Wheat $0,963 per bu.; corn $0.64 per bu.; cotton 
$0,121 per lb.; sugar $0.0465 per lb.; wool $0.34 per 
lb.; iron $23.89 per ton; copper $0.2125 per lb.; rub- 
ber $1.0633 per lb.; pork $17.56 per bbl.; coffee 
$0.0658 per lb. 

1908 
Wheat $1.04J per bu. ; corn $0,786 per bu. ; cotton 
$0,106 per lb.; sugar $0.0496 per lb.; wool $0.34 per 
lb.; iron $17.70 per ton; copper $0,133 per lb.; rub- 
ber $0.8708 per lb.; pork $15,973 per bbl.; coffee 
$0.0628 per lb. 

1909 
Wheat $1.20f per bu.; corn $0,743 per bu.; 
cotton $0,116 per lb.; sugar $0.0474 per lb.; wool 



RANGE OF COMMODITY MARKET 91 

$0.35 per lb. ; iron $17.46 per ton; copper $0,129 per 
lb.; rubber $1,505 per lb.; pork $21.5673 per bbl.; 
coffee $0.0775 per lb. 

1910 

Wheat $1.13 per bu.; corn $0,583 per bu.; cotton 
$0.15 per lb.; sugar $0.0498 per lb.; wool $0.33| 
per lb.; iron $17.17 per ton; copper $0,128 per lb.; 
rubber $1,956 per lb.; pork $24.04 per bbl.; coffee 
$0.0932 per lb. 

1911 

Wheat $0.96 per bu.; corn $0,628 per bu.; cotton 
$0,137 per lb.; sugar $0.04632 per lb.; wool $0,287 
per lb.; iron $15.45 per ton; copper $0.1223 per lb.; 
rubber $1.16 per lb.; pork $19.63 per bbl.; coffee 
$0.1309 per lb.; 

(For quotations and prices subsequent to 1911, see Addenda at end 
of the book.) 



A WORD TO BANKERS 93 

As a check upon the above specific figures, the 
same general results may be shown by the use of 
Bradstreet's Index of American Commodity Prices 
or the Economist's Index of English Commodity 
Prices. Both of these indexes show tremendous 
fluctuations and most clearly demonstrate the 
great need for merchants and all dependent upon 
the welfare of merchants, to study fundamental 
statistics. 

Though economists agree that there is a very inti- 
mate relation between the prices of commodities 
and the price of money, many banks expend far too 
little time in studying fundamental statistics and in 
forecasting future money conditions. With a gen- 
eral foreknowledge of the tendency of rates, a bank 
may so arrange its maturities as to obtain at least 
one-half of one per cent, more on outstanding loans 
than is possible without such knowledge. It may 
be necessary to allow a customer to choose either 
the "rate" or the "maturity," but banks should in- 
sist upon their right to fix the other factor and, 
when doing so, should have in mind the tendency of 
the money market. If the tendency is upward and 
the borrower desires to pay only the market rate, the 
bank should insist on a short loan ; while if the bor- 
rower desires a long time loan, the bank should in- 
sist on a rate above current market rates. The 
reverse is true if the tendency of money is down- 
ward. Some banks even keep a weekly record of 
the exact rate of income their loans average. 

To buy bonds when money is cheap, in order to 
obtain a higher income than can be obtained on 



94 BUSINESS BAROMETERS 

notes, is a very dangerous practice; as banks then 
purchase bonds after the price has advanced and 
are often compelled to sell them at a loss during 
the next money stringency or else refuse accommo- 
dation to customers. By studying the teachings of 
fundamental statistics, however, a bank may safely 
purchase high-grade securities with the expecta- 
tion of later selling them at a profit; because such 
banks know when this time for selling said securi- 
ties is at hand. The most conservative banks pur- 
chase for permanent investment only government 
and such bonds as can be counted as "Reserve," 
and purchase general corporation bonds (those of 
the very highest grade) only for the purpose of sell- 
ing again at a profit in the course of a short time. 
Such banks buy them during a period of high money 
when bonds are always low; and sell them before 
money again becomes high. 

Such conservative banks not only receive an in- 
come of about 4% upon such securities and a profit 
of from 10% to 20% on the sale, but also are always 
in the strongest possible condition with very large 
reserves at the time of a crash or money stringency. 
Therefore, the study of fundamental statistics not 
only enables banks to receive greater income from 
their loans and large profits from the purchase 
and sale of securities, but insures that such banks 
buy only the highest grade of securities and more- 
over sell them before the money is needed for re- 
serve purposes and the accommodation of local 
customers. 

In short, banks have two distinct functions: 



A WORD TO BANKERS 95 

( 1 ) Aiding in the creation and operation of trans- 
portation, industrial, and commercial enterprises 
by providing the capital therefor. 

(2) Regulating the number and growth of such 
enterprises by conscientiously increasing or con- 
tracting this supply of capital. 

The first function is performed by collecting 
money from a large number of people, known as 
"depositors," and loaning the same for definite 
periods by purchasing therewith commercial paper 
and other securities such as most depositors would 
be unable to do independently. The second func- 
tion is performed by varying the amount of cash 
and securities held ; for instance, during periods of 
panic or of depression, when most individuals 
withdraw money from useful channels and with- 
hold cash, it is a bank's duty to give out all cash 
possible by purchasing such good commercial paper 
and high grade securities as are selling below their 
true value. On the other hand, during periods of 
great prosperity, it is a conservative bank's duty to 
dispose of a large portion of this commerical paper 
and these other securities, storing up large cash re- 
serves pending the next period of money stringency 
and panic conditions. 

In this way such banks not only perform a great 
service both to depositors and borrowers by com- 
bining small sums and loaning them in safe and 
profitable channels, but also act as regulators and 
"storage basins" for the entire business community. 
Such banks store cash during periods of great pros- 
perity, when the public is willing to loan anybody 



96 BUSINESS BAROMETERS 

and buy anything, and then give out such cash 
during periods of depression when the public re- 
fuses to loan solvent borrowers or to purchase even 
the highest grade securities. Moreover, for per- 
forming these two functions such banks receive a 
two-fold reward, namely: the market rate of interest 
on the loans and securities held, and also every few 
years a large profit on the sale of securities. More- 
over, banks which do not fulfill these two func- 
tions not only fail to serve fully their true purpose 
in the community, but also make very much smaller 
profits and assume very much greater risks. 

Many banks have heretofore failed to perform 
this second function owing to their inability to ob- 
tain independently the necessary statistics for cor- 
rectly judging the trend of conditions; but as such 
statistics may now be obtained at small expense 
from a central agency,* this objection is overcome. 
The above also applies as well to borrowers of 
money as to lenders. 

Moreover, the most successful manufacturers 
and merchants have found that the system of 
'fixed" credit limits for customers is absolutely 
wrong in principle; unjust to customers; unfair to 
the sales force and a source of danger to the firm. 

Instead, a system of "flexible" credit limits is 
used by which credits are increased and decreased, 
in accordance with the relative position and size 

*In order that firms may keep accurately informed as to present and 
future conditions, my statisticians accumulate and analyze the necessary 
facts and figures used in determining the same. These figures we supply 
to our subscribers together with certain Weekly Barometer Figures. These 
Barometers are also of great value in connection with the purchase of mer- 
chandise, the discounting of commercial paper and the investment of money. 

R. W. B. 



A WORD TO MERCHANTS <J7 

of the latest area of the Composite Plot of Busi- 
ness Conditions explained in the following chapter. 
This system invariably results in greatly increased 
sales and yet insures that a firm shall be in a strong 
financial position at a time of panic or business 
Crisis. These various practical applications of 
fundamental statistics cannot, however, be ex- 
plained in detail in this volume. 



CHAPTER IV 

THE THEORY OF FUNDAMENTAL STATISTICS 

UP to the present point I have been content 
in outlining what is meant by Fundamen- 
tal Statistics and the great value of such 
statistics to bankers, merchants and investors. 
I now wish to show why the subjects heretofore 
mentioned are studied and what evidence we have 
for using the laws upon which this work is based. 

That there have always been periods of depres- 
sion and periods of prosperity and intermediate 
periods, every one already knows.* There is ab- 
solutely no dispute regarding this first point. But 
as to the duration of these periods there is a distinct 
difference of opinion. It is the general impression 
that the great major cycles are of about twenty 
years' duration, and the minor cycles are of about 
five years' duration, with possibly still other 
cycles of about ten years' duration. Probably the 
most interesting work on this subject was done by 
Samuel Benner who, from 1875 to 1884, formulated 
a most elaborate system of charts and who, with- 
out doubt, clearly foretold the panics of 1884 and 
1893, and the prosperous years intervening. Many 
other men have devised other charts and theories, 
some based on supposed economics and others 
based on superstition, but all have been found to 
fail, and have been forgotten. 

Upon careful examination all these charts and 

*See Monetary Commission volume on "Crises," by Professor Sprague 
of Harvard, a foremost authority on "Applied Economics." 



v^ ''.>'.. LUJ 




copyright 1911 b y R og „ w. B.b,on Composite Plot of the Summary Barometer Figures for American Business Conditions 

^J^Jip^f^^ f„tt^£»^: ^^ZXZW,^ -■»*!-. ">** 

m. Money, Kdlures. Idle Cars, etc., in order to give a Composite Plot of ailu .1 . , \""B"ac. 

i by clearings, etc. Based on the economic theory there a to Hp a nnnlf ^r «i,r, n i« * rtr*H„ol ii n ..i^J!j nn ir„, n i« n .£i» ..h _° wnetne ? business, the < 



Entered at Stationer's Hall, London 



iDhas expanded to approximately 
It, however, should be remembei 






I the low point t 



I of conditions as shown by clearings. 



mult!: Wed 10 form a 

«0w tii XV must, over a nufflt lently long period 

XV Is properly locaf ' 



equal" when the two factors of tin. ty are to be equal, 

of the areas above and below said line of normal 1 1 

e equal, provided the line solid line re 

£h subjects are herewith Included, with all properly price of act: 



i panic or simply a gradual tlqu 



Knowing that t 



bered that beginning of a prosperity area and hl eh moQ rate9 and ,» 

■ area. To use : this Composite Plot In con 
sales thereon and r. 



hlng each weelc When using this plot 



1«t n .™T^.^«? b '?.™ sale, , 



d prices at the begtn- 
:e what portion of tho 



ough not necessarily 



active bonds, and the solid black line represents the average interest rate for sent state should be watched in conjunction " * " 

ommerciai paper. A study of theoe lines shows that the hitfh nnint- ^# »k~ ,..,i» „f -i k>- .,„,« n ..- -■-- 

arket has come when the prosperity area la about one-fifth t 




FUNDAMENTAL STATISTICS 99 

theories are found to have two great defects; and it 
is only because the area theory herein discussed 
eliminates these two defects that said theory and 
the Composite Plot deserve attention. 

Reaction Equals Action 

The first defect in the old theory of Benner and 
other writers consisted in the fact that they based 
their calculations simply on either time or activity, 
instead of on their product. There is no law in 
physics or nature that any action or any reaction 
must come with any definite regularity. There is, 
however, a law under which mechanics, medicine, 
and other sciences move, namely that "action and 
reaction are equal." This is absolutely true; but 
when a mechanic or a physician or any one else 
attempts to go one step further, he fails completely. 
Action and reaction are equal; but of what "re- 
action" consists, there is no known law. For in- 
stance, we may say that certain reaction amounts 
to one hundred foot-pounds. But whether the 
body weighs one hundred pounds and is moved 
one foot or weighs only one pound and is moved 
one hundred feet, we have no way of knowing until 
we learn one factor. 

In other words, to say that a period of prosperity 
or a period of depression will last any given time, 
irrespective of the business activity of the country 
during such time, is contrary to all basic law. Yet 
upon such reasoning most of our predecessors have 
worked, while the others believed that a change in 
conditions comes when figures for pig-iron, bank 
clearings or commodity prices reach a certain point. 



100 BUSINESS BAROMETERS 

They entirely ignore the product of time and ac- 
tivity. Yet only by multiplying one by the other 
can the true reaction be ascertained. Time, then, 
may be compared to space, and activity may be 
compared to weight, and their product to space 
multiplied by weight or to "foot-pounds." 

For this reason, when studying a Composite Plot 
like the annexed (which is based on all the twelve 
subjects heretofore mentioned), able bankers and 
merchants to-day do not study height nor length, 
but simple area. That is, such men believe that 
the shaded portions above the line of growth X-Y, 
shown in the plot, should approximately equal in 
area the shaded portion below said line. Thus, if 
the country is enjoying a condition of only medium 
activity, prosperous conditions may be expected 
to extend over a longer time than if tremendous 
prosperity now abounds, and vice versa.* 

Leading bankers, merchants and investors, there- 
fore, collect data on all these subjects, in order to 
keep always informed as to the area being con- 
sumed. This is the first and most important step 
in forecasting future mercantile, monetary and in- 
vestment conditions. 

All Subjects Must Be Considered 
The second great error heretofore made by these 
economists consisted in the fact that each man 
seemed to focus his attention on only one or two 
subjects, instead of making a composite interpre- 
tation of all. Some would study bank clearings, 
some foreign trade, others gold movements and so 

*See "Cours d'Economie Political," by Vilfredo Pareto, Vol. II. 



FUNDAMENTAL STATISTICS 101 

on, believing that, as the figures on their particular 
pet subject or subjects changed, it was possible to 
forecast future conditions. Many still believe it 
is possible to follow certain subjects in this way; 
but all such systems are absolutely wrong. No one 
of these subjects, when studied independently, 
serves to foretell the great changes in conditions 
which have occurred since 1860. Some of the 
subjects seem to work out better than others; but 
all of them entirely fail to give proper warning in 
some instances. 

For illustration, "gold movements" formerly was 
used as one of the very best barometers of future 
conditions. During heavy imports of gold (such 
as occurred in 1878-1882) the United States en- 
joyed unparalleled prosperity and after said imports 
declined and the exports of gold exceeded the im- 
ports (as in 1882-1883) followed the panic of 1884. 
This same rule worked most admirably in fore- 
casting the prosperous times of 1888-1890, the 
panic of 1893, and the prosperous times of 1898- 
1902. The rule, however, did not work in fore- 
casting the panic of 1903 nor the prosperous years 
following, and the heaviest imports of gold the 
United States ever enjoyed preceded the panic of 
1907. Of course the reason for these huge imports 
in 1906-1907 is now well understood; but any one 
who in 1906 simply studied the bare figures, with- 
out knowing that such importations were artificial, 
would have been justified in expecting that 1907 
and 1908 would be years of great prosperity. On 
the other hand, such an error would not have been 



102 BUSINESS BAROMETERS 

possible if a study had simultaneously been made of 
the other leading subjects. 

In short, a study of all these subjects reveals the 
fact that no one of them can always be depended 
upon; but that in the case of every panic, or other 
change in business conditions, some of the subjects 
fail to give warning whatsoever. On the other 
hand, such study has shown that there has not been 
a single case when a change in conditions has not 
been fully and plainly foretold by a majority of 
these subjects. If one will study the figures or 
plots which treat of the twelve or more most im- 
portant of said subjects, the following facts are 
self-evident: 

Four general rules can be worked out for each 
subject — one rule for each of the four periods of 
prosperity, decline, depression and improvement, 
respectively. These rules are given in detail for 
each of the twenty-five subjects, in Chapters VI, 
VII and VIII. The basis of these rules is that 
very high figures, such as appear during very pros- 
perous conditions, foretell a panic or period of de- 
cline. When the high point is passed and the plot 
points downward, as occurs during a decline, a 
period of depression may be expected. Very low 
figures, such as appear during a depression, foretell 
a period of improvement. And when the low point 
is passed and the plot turns upward, as occurs 
during a period of improvement, prosperous con- 
ditions may again be expected. 

Although bankers and merchants may often de- 
pend upon what one of these subjects signifies, yet 



FUNDAMENTAL STATISTICS 103 

it is never safe to do so. On the other hand, it is 
safe to always depend upon what the majority of 
the subjects signify. That is, if during prosperous 
times we are studying twenty-five subjects, and 
more than fourteen signify either "no further im- 
provement" or "caution," then we may begin to 
prepare for trouble which is sure to follow. Con- 
versely, if during a business depression fourteen of 
the twenty-five subjects foretell "improvement," 
then improvement will surely follow. 

General Considerations 
Therefore, all figures are best reduced to a single 
line summary plot, in order to ascertain the "area" 
above or below the average line, although the sepa- 
rate charts on the different subjects may be again 
referred to as a check and interpreted in accord- 
ance with the laws just outlined. If both the com- 
posite plot and the interpretations foretell the same 
change, this change may surely be expected to come 
to pass; while if both do not foretell the same 
change, one may assume that at said moment con- 
ditions are uncertain, although a week or so later 
this uncertainty may not exist. 

This practically completes the work, although 
as a further study, it is interesting to refer back to 
previous history and ascertain what changes, after 
such conditions as exist to-day, have followed in the 
past. This is accomplished by referring back to 
points in the various past business cycles when (1) 
the same area above or below the average line 



104 BUSINESS BAROMETERS 

existed as exists to-day; and (2) when a majority 
of the twenty-five subjects foretold (according to 
the above rules) the same conditions which they 
foretell to-day. 

In connection with this feature there is a certain 
sequence of events which is also a distinct aid to 
bankers, merchants and investors when studying 
these figures. This sequence is similar to the 
various stages of disease with which physicians are 
so familiar. Sometimes one stage of the disease 
"runs" longer than usual; but the sequence is always 
the same. In the same way, it is not always possible 
to judge correctly the exact duration of each period 
of increase or decline in prices; but by a study of 
fundamental statistics it is always possible to as- 
certain in which period we are and what will be the 
next period. If, for instance, a study of funda- 
mental conditions shows us to be in a period of in- 
creasing money rates, we know that we shall pass 
through twelve periods before we will again enter 
a period of increasing money rates. These periods 
are as follows: 

1. Period of Increasing Money Rates. 

2. Period of Declining Bond Prices. 

3. Period of General Prosperity. 

4. Period of Declining Stock Prices. 

5. Period of Declining Commodity Prices. 

6. Period of Declining Real Estate Prices. 

7. Period of Low Money Rates. 

8. Period of Increasing Bond Prices. 
9 Period of Increasing Stock Prices. 



FUNDAMENTAL STATISTICS 105 

10. Period of Increasing Commodity Prices. 

11. Period of Increasing Real Estate Prices. 

12. Period of Increasing Money Rates. 

As the prices of stocks continue to rise after 
the prices of bonds begin to fall, bankers expect 
the prices of stocks to continue to decline for some 
time after the prices of bonds have become steady. 
Industry, as a whole, follows several months behind 
stock prices. The prices of commodities, perhaps, 
stop rising at about the same time that the prices 
of bonds stop falling. Interest rates are likely to 
continue to rise until the prices of land values have 
declined sharply. This latter event usually com- 
pletes the decline in prices that precedes and ac- 
companies a panic. Conditions in other countries 
and crop conditions in this country also have much 
to do with the date and extent of a period of depres- 
sion or a period of prosperity. 

In short, this study of fundamental statistics 
consists simply in ascertaining present surface 
conditions and interpreting them with the view of 
forecasting future conditions. In many ways the 
work resembles the work of a physician. A man 
goes to his physician to be examined for life in- 
surance and the physician first obtains a knowledge 
of the man's present condition by an examination 
of his pulse, temperature, kidneys, respiration, etc. 
The physician secondly refers to his medical library 
and ascertains what usually follows when a man's 
heart, kidneys, lungs, etc. are in such a condition 
as the patient's, and thus interprets these symp- 
toms. The physician thirdly combines his knowl- 



106 BUSINESS BAROMETERS 

edge of the man, his present condition, his mode of 
life and his symptoms, and forecasts for the in- 
surance company how long, in his opinion, based 
on previous history, this man will live. That ac- 
tion and reaction are equal and that history usually 
repeats itself is the foundation of the science of 
medicine, and upon such a foundation the great 
business of life insurance is absolutely dependent. 
If the reader believes there is nothing to the science 
of medicine and that any average man knows as 
much and can advise as well about one's physical 
condition as a highly trained physician, then he is 
not expected to be a believer in fundamental statis- 
tics. On the other hand, if he has faith in the 
knowledge and advice of an able physician, then 
he should give this subject most careful attention 
and consideration. 

The Mechanical Work 
In the first portion of this book I described the 
meaning of fundamental statistics and their use. 
In this chapter I have outlined the theory under- 
lying the work and the reason why such statistics 
may be depended upon. Now a few words may be 
given to explaining the mechanical work of com- 
piling and reducing these figures to one single 
"Summary Barometer Figure" such as is the basis 
of the above mentioned Composite Plot. 

In approaching the work, although other methods 
may seem sufficient, the need of direct and definite 
results leads the student to seek a systematic, 
comprehensive, and uniform practice, so that a 



FUNDAMENTAL STATISTICS 107 

basis of comparison from period to period, may be 
established at the outset. The course usually 
followed by the leading bankers, merchants and 
investors when studying fundamental statistics is 
to collect data covering a long period of years, and 
relating to the following twenty-five subjects under 
twelve headings. 

These twelve headings correspond almost iden- 
tically with the twelve subjects mentioned in Chap- 
ter I. 

I. Building and Real Estate. 

Building Operations (with fire losses). (1) 

II. Bank Clearings. 

Total Bank Clearings of the United States. (8) 
Bank Clearings of the United States, excluding 
New York City. (9) 

III. Business Failures. 

Tables on number of failures, amount of lia- 
bilities, and ratios. (12) 

IV. Labor Conditions. 

Tables of immigration figures and notes on the 
general situation. (13) 

V. Money Conditions. 
Money in Circulation. (2) 
Comptroller's Reports. (3) (This is the only 

one of the twenty-five subjects for which 
no figures can be obtained monthly.) 
Loans of the New York Banks. (4) 
Cash held by the New York Banks. (5) 
Deposits in the New York Banks. (6) 
Surplus Reserves of the New York Banks. (7) 



108 BUSINESS BAROMETERS 

VI. Foreign Trade. 

Imports of Merchandise into the United 

States. (14) 
Exports of Merchandise from the United 

States. (15) 
Balance and Volume of Trade. (16) 

VII. Gold Movements. 

Gold Movements, with tables on the exports, 
the imports and the balance of gold move- 
ments. (17) 

Domestic and Foreign Money Rates and For- 
eign Exchange, with tables on the rates in 
London, Paris and Berlin. (18) 

VIII. Commodity Prices. 

Production of Gold. (20) (Tables giving the 
production in the Rand Mines which best 
show the trend in the production of the entire 
world.) Prices of Commodities, including 
wheat, corn, cotton, iron, copper, etc. (21) 

IX. Investment Market. 

Stock Exchange Transactions. (10) Tables 
on number of shares traded in, the bond 
sales, and the high and low prices of the ten 
leading investment stocks given in Chapter 
II. The latter tables contain the high and 
low prices for each year since 1859, and the 
high and low for the current year, revised 
each month. 
New Securities. (11) Tables for the new 
securities listed on the New York Stock 
Exchange and figures relative to other issues 



THE COMPOSITE PLOT 109 

publicly offered or authorized, but as yet 
unlisted. 

X. Crops and Commodity Statistics. 

Crop Conditions and Production of commodi- 
ties, including pig-iron and copper. (12) 

XI. Railroad Earnings. 

Railroad Gross and Net Earnings of ten leading 
railroads, (23) with annual figures for all 
railroads relative to the new mileage con- 
structed, etc. 

Idle Car Figures. (24) for the current year 
and the corresponding months of the preced- 
ing two or three years. 

XII. Social Conditions. 
Political Factors. (19) 
Religious Statistics. (25) 

The figures on these twenty-five subjects are 
kept upon large desk sheets, which are usually 
divided into twelve sections. It has taken many 
years to accumulate these figures, as they represent 
tedious and careful research. They are the founda- 
tion of the entire work, and it is impossible to make 
practical use of fundamental statistics excepting in 
connection with these tables for preceding years and 
months. 

The Composite Plot 

The twenty-five subjects in the list above out- 
lined are arranged so they may be grouped and 
classified under the three following headings: 

1. Tables used when studying mercantile con- 
ditions. 



110 BUSINESS BAROMETERS 

2. Tables used when studying monetary con- 

ditions. 

3. Tables used when studying investment and 

other conditions. 
In detail this classification is as follows: 

(These divisions are purely arbitrary, as every 
subject affects in some manner each of the 
three divisions.) 

FOR CORPORATIONS AND MERCHANTS. 

Iron Production and New Building. 

Bank Clearings. 

Business Failures. 

Labor Conditions. 

(Also Earnings, Crops, Politics, etc.) 

FOR BANKERS AND OTHERS LOANING MONEY. 

Money Rates. 

Foreign Trade. (Surplus Reserve.) 

Foreign Money Rates and Gold Movements. 

Commodity Prices. 

(Also Clearings, Failures, Politics, etc.) 

FOR STOCK EXCHANGE FIRMS, BOND HOUSES 
AND INVESTORS. 

. Stock Prices and Transactions. 
Crop Statistics. 

Idle Car Figures and Railroad Earnings. 
Social and Political Factors. 
(Also all figures on Mercantile and Monetary 
Conditions.) 
Investors and merchants who carefully study the 
figures on these subjects each week obtain one 



THE COMPOSITE PLOT 111 

barometer figure* for present surface conditions 
for each of the three headings given above. Then, 
by averaging the three figures, they obtain a final 
summary barometer figure for present surface con- 
ditions. 

The summary barometer figure for present con- 
ditions — when plotted from January, 1903 to date, 
gives the outline of the black Composite Plot, 
which is such a valuable guide when studying 
business conditions. 

The large black areas are formed by combining 
and plotting the published figures for the past 
seven years on Bank Clearings, Failures, Money 
Rates, Idle Cars, etc., in order to give a composite 
view of actual business conditions. The line X-Y 
represents the normal growth of the country's 
business, and is subject to revision each year. 
Based on the economic theory that "action and 
reaction are equal when the total force is con- 
sidered," we can only have above the normal line 
of growth an area approximately equal to the area 
below the normal line of growth. In other words, 
before there is another panic, an area should be 
consumed at "D" equivalent approximately to the 
average of the three areas "A," "B" and "C." The 
solid red line represents the average price of certain 
stocks during the past seven years and the dotted 
red line, the average price of bonds. Although dur- 
ing these years the red line has discounted the black 
line, yet this cannot be depended upon, as previous 

* Moreover, persons using different scales would obtain similar plots. 
Although their definite figures for each week or month would differ, yet 
the relation of one week to another should be identical. 



112 BUSINESS BAROMETERS 

to 1903, there were many instances when the black 
line rose and fell first. Therefore, the only safe 
method is to study both the black and red plots to- 
gether, giving the most weight to the black plots. 
Moreover, it should be remembered that the areas 
usually refer only to periods in our minor cycles and 
not to the major cycles extending over about 
twenty years. So that we may be in a prosperous 
period of a minor cycle and still be in a declining 
period of a major cycle. 

Practically speaking, these barometer figures on 
surface conditions are mathematically correct, be- 
ing obtained by compiling the actual figures on 
bank clearings, money rates, stock exchange prices, 
transactions, etc., with certain scales* of measure- 

*This is done by having a system of scales for each of the leading subjects 
studied. For this work not less than twelve subjects should be studied, and 
not more than twenty-five. A very simple illustration of such a scale is the 
following, used in the case of Foreign Money Rates: An average is made of 
the rates of the banks of England, France and Germany. Assuming this 
average to be 4%, the statistician refers to the scale to find the index figure 
for this 4%. In the same way it is customary to have scales for each of 
these subjects, thus reducing all classes of miscellaneous figures, whether 
Money Rates which appear as percentages, Bank Clearings which appear 
in dollars, or Crops which appear in bushels, to one common scale. Of 
course for certain subjects, such as Bank Clearings and Railroad Earnings 
which vary with different seasons of the year, it is necessary to have twelve 
different scales, one for each month; but this is simply a matter of detail. 

After working out all of the mass of figures, those subjects that especially 
relate to mercantile conditions are reduced to one independent barometer 
figure for mercantile conditions; which is simply done by adding up the 
individual scale figures for each of said subjects and dividing by the number 
of subjects. In the same way an independent barometer figure is worked 
out for monetary conditions, based on the scale figures for subjects especially 
related to monetary conditions. In the same way a third independent 
barometer figure is worked out for the remaining subjects, including those 
especially relating to investment conditions. After these three independent 
barometer figures had been obtained on mercantile, monetary and mis- 
cellaneous conditions respectively, these three independent barometer 
figures are added and divided by three, thus giving a final summary barom- 
eter figure, which is the figure plotted to ascertain at any time the area 
consumed on a summary plot. 

The writer started his scale with zero as representing the conditions 
existing in 1902-4 directly before and after the panic of 1903, and with 
such a scale, the high during the year 1910 was considered as about 70. 
There is, however, no reason why his scale should be the only proper scale, 
as other students of fundamental statistics have started with scales where 
zero represented conditions ten or more years ago. In such cases, their 



THE COMPOSITE PLOT 113 

ment and averaging the final results. These figures, 
therefore, are not a matter of opinion and any two 
persons using the same scale would arrive at the 
same conclusion. 

In the case of the barometer figures for complete 
prosperity conditions, the method is different. Al- 
though the basic figures are derived from the use 
of a fixed scale, the result must often be modified 
in accordance with other data and the opinions of 
merchants, investors or bankers making the de- 
ductions. Personally the writer does not believe 
in using any figure for "normal, prosperity" or 
complete prosperity conditions. 

Although the main use of the barometer figures 
is to plot the "area" mentioned earlier in this 
chapter, these figures are also interesting for other 
purposes. If, for instance, during a period of de- 
pression the final barometer figures for a long period 
of weeks show a continuous but slow increase, the 
country is usually facing improved conditions, 

high for 1910 would probably be in the vicinity of 150. In reality it 
makes little difference what the definite scale figure is, provided the base 
is submitted therewith to use for comparison purposes; for it is a fact that 
if a number of different statisticians, with different scales which started at 
different times, should plot their summary figures, all the plots would look 
alike and the relation of the different areas above and below the average 
lines would be the same. In other words, different men with different 
scales would obtain different summary barometer figures for a definite dole; 
but the relation between their figures would be the same always, and this is 
the only vital and important feature involved. 

For this reason bankers, merchants and investors are justified in using 
the barometer figures worked out by a central agency and thus avoiding the 
difficulty and expense involved in working out such figures for themselves. 
Moreover, as such a central agency continually plots these summary 
barometer figures, to-day it is only necessary for the up-to-date business 
man to refer to the plot furnished by the central agency and keep in abso- 
lute touch with the area being consumed on the present cycle. He then 
can independently forecast for himself: (1) In what period we are to-day; 
(2) The duration of the present period; (3) Whether the next period will be 
a period of prosperity, a period of depression, or an intermediate period. 
Is not this information about all the able banker, merchant or investor 
needs? 



114 BUSINESS BAROMETERS 

however poor business may appear to the average 
merchant. On the other hand, during a period of 
prosperity, if the barometer figure for surface condi- 
tions continues to abnormally increase, there is 
liable to be a change for the worse at any time. 

The fundamental principle to be remem- 
bered, however, concerning the Area Theory 
is as follows : If X-Y truly represents the nor- 
mal growth of the nation, and if the black 
areas truly represent the actual growth, then 
these areas should balance. 

Monthly Interpretations 

But in addition to collecting figures to deduce 
barometer figures therefrom, some merchants and 
bankers have the monthly figures on each of the 
twenty-five or more subjects mentioned above, 
interpreted* each month for what they signify. 

*When interpreting the original figures in accordance with the rules 
above suggested (the second step outlined in the early part of this chapter) , 
the following method is used. A record of the monthly figures on the 
twenty-five subjects, properly arranged so that they may be quickly com- 
pared, is kept before one, in tabulated form, together with the figures by 
years, back to the Civil War. Such sheets may now be obtained from a 
central agency, which agency keeps the sheets and tables constantly revised 
so that when a new sheet is obtained it is only necessary to throw the old 
sheet away and substitute the new sheet in its place. On the new sheets 
appear all the figures that appear on former sheets and in addition the new 
figures which have been published during the preceding week. 

In addition however to having the figures in such sheet form (thus 
always enabling the banker, merchant or investor to have before him a 
bird's-eye view of the situation), it is also desirable to have the definite 
figures for each month with a comparison with figures for the same month 
of the previous year also printed or written on a separate sheet. This 
shows one at a glance whether the new figures for the current month on 
each subject show an increase or a decrease. As soon as this is ascertained 
one may refer to the rules and know what this increase or decrease signifies. 
As each subject is interpreted in this way, the different interpretations 
should be recorded and a final summary made. This summary should 
show how many of the twenty-five subjects signify continued improvement; 
how many signify no improvement; how many signify caution, and how 
many signify no change. 

As this work is purely mechanical, there is no reason why bankers, mer- 
chants and investors cannot also depend upon a central agency for prepar- 



FUNDAMENTAL STATISTICS 115 

Such interpretations are made in accordance with 
the rules given in Chapters VI, VII and VIII, and 
show how many subjects signify a "Continued Im- 
provement," how many signify "No Improvement" 
and how many signify "No Change." Figures on 
the majority of these twenty-five subjects can be 
obtained not oftener than monthly, and therefore 
final totals need be studied in detail but once each 
month. If there has been a normal growth or 
change, — sometimes a favorable showing requires 
an increase or sometimes a decrease, — the figures 
on a given subject are considered as signifying satis- 
factory conditions; but if a growth or a change is 
not normal, the figures are considered as showing 
unsatisfactory conditions. In other words, satis- 
factory conditions require a normal change and 
figures of much less than normal or much more than 
normal are considered unsatisfactory. 

The industrial organization of the country is 
similar to the physical organization of the human 
body. The individual normally should have a 
certain appetite and should require a normal 
amount of food. The normal appetite increases 
from childhood to youth, and from youth to matur- 
ing these comparisons in the form of a monthly report. When this is done 
the work is tremendously simplified for any student of fundamental sta- 
tistics. Therefore not only may arrangements be made for collecting the 
original figures, as they appear from day to day, and as they have appeared 
in the past, and for having them reduced to barometer figures and plotted — 
the first feature of the work; arrangements can also be made to have them 
tabulated in sheet form and once a month compared as to their increases 
and decreases — the second feature of the work, namely, the interpretation 
according to the rules mentioned. This, therefore, eliminates all mechani- 
cal work on the part of any bank, firm or individual, and it is only necessary 
for one to note the summary plot once a week, the interpretations once a 
month, and take a general view of the tables whenever convenient. Upon 
so doing one automatically, of himself, makes a forecast of future mercantile, 
monetary or investment conditions. 



116 BUSINESS BAROMETERS 

ity; but its relation to health is the same. So long 
as a man regularly eats a normal amount, he con- 
tinues to increase in strength and vitality; but if 
he overeats, or is underfed, he ceases to gain 
strength, his efficiency is reduced, and he becomes 
subject to attacks of disease. As therefore the 
maintenance of good health requires a certain 
normal balance, so do the prosperous conditions of 
industrial life. This evidently does not mean fixed 
conditions, as in a rapidly growing country like 
America, the figures to be normal must increase in 
proportion to the increase in the wealth, population 
and activity of the country. Great increases or great 
decreases are distinctly not normal and are always 
significant of a marked change; a change for the 
better in time of depression, when present con- 
ditions are very unsatisfactory; or a change for the 
worse during a period of prosperity, when present 
conditions are apparently very satisfactory. 

As an illustration, however, of how the leading 
financial papers fail to recognize this principle, the 
following from an editorial of October 9, 1909, in 
what the writer considers America's most valuable 
financial weekly, is of interest: 

"It seems inconceivable folly to argue in favor of further meddling. If 
a man should protest, with sorrowful anxiety, that his bodily vigor is so 
great that he is really in fear about his future, and should forthwith set to 
ransacking the market for proprietary nostrums to keep himself regulated 
and down, he would be rated wanting in good sense. But what is a nation 
except a mass of persons, and is prosperity a matter to be anxious about or to 
be afraid of? The very question sounds absurd. Nevertheless, in a speech, 
on entering California this week, our worthy President, after sounding the 
paean of coming prosperity as loudly as language could do it, added that the 
difficulty is that whenever everybody is prosperous, when everybody is 
comfortable, then is the time when our old friend Satan steps in and helps 
along the evil cause; then is the time when we are apt to be inert and enjoy 
the things we have, without looking forward in the future and seeing that 
the evils will grow and ultimately swamp us." 



FUNDAMENTAL STATISTICS 117 

Of course, our President was right, and our es- 
teemed contemporary wrong. Great prosperity 
is a matter to be feared. When a man or a nation 
is in a normal condition, there may be nothing to 
be anxious about; but when a man or a nation 
overworks or "lives too high," or in any way be- 
comes strained or careless, trouble is sure to follow. 

This same principle is illustrated in the case of 
Interest Rates.* For instance, when interest rates 
gradually increase and surplus reserves gradually 
decrease after a period of depression, the combi- 
nation is significant of improved present conditions; 
when commercial paper is discounted at 3^%, one 
may always be sure that the country is not pros- 
perous, that many factories are idle and many men 
out of work. As the mills resume operation and as 
business becomes more active, money rates increase 
and surplus reserves decrease, all of which increase 
is shown by higher barometer figures for surface 
monetary conditions. Then, as money rates in- 
crease too much, and the surplus reserves decrease 
to very low figures, the change is significant of un- 
satisfactory future conditions. In other words, 
when money rates are below normal it shows busi- 
ness is dull, but may be better; and when money 
rates are above normal, it shows that business is 
good, but will soon be worse. 

Of course if this data were obtained by each in- 
vestor, merchant or banking house independently, 
it would require a force of clerks to collect, analyze 
and sort the mass of figures; but as the data may 
now be obtained from a central agency, all of the 

*See the very valuable book on this subject by Professor Irving Fisher 
of Yale University. 



118 BUSINESS BAROMETERS 

drudgery is eliminated. The investor or merchant 
may simply note the barometer figures as they are 
made up each week, thus keeping in constant touch 
with surface conditions; and by reference to the 
monthly figures once a month, these surface con- 
ditions may then be interpreted in accordance 
with the rules mentioned. Moreover, the average 
banker, merchant and investor is satisfied to depend 
upon the barometer figures and reports furnished 
by this central agency, and not to make a personal 
examination more than once or twice a year, de- 
pending rather upon a weekly perusal of the Com- 
posite Plot. 

But whatever the time or money expended, all 
merchants and investors always obtain great 
pleasure from such studies. The Composite Plot 
and the data from which it is compiled not only 
give a clear idea of the present conditions, but also 
of what may be expected in the future. If during a 
period of depression, uncertainty and discourage- 
ment, the Composite Plot and individual charts 
show distinctly that the country is about to enter 
a period of prosperity, investors buy stocks, mer- 
chants buy goods, and bankers extend loans. The 
result is that, when prosperity returns, such in- 
vestors and merchants find that they have pur- 
chased very much below the prevailing prices and 
obtain many times the profit that they otherwise 
would. 

During a period of great prosperity and extrava- 
gance, when everybody is buying goods or securi- 
ties and there is a general increase of indebtedness, 



aoro 



• 






COMPARISON OF THE MAIN FEATURES OF FIVE PANICS with ™rrn, t>™„ „ 

___- ^nu^WITH SPECIAL REFERENCE TO THEIR EFFECT IN THE UNITED STATES 



1857 



Mexican War at home — Crimean War abroad. 
Gold discoveries of 1848-49 — production glim,- 
000,000 up to 1856, aiding in preventing panic 
wliic li might have been caused by suspensii n of 
United States Bank and other banks. It also 
contributed to recovery from depression incident 
to crisis of 1857. United States— a rapidly de- 
veloping nation, at the same time financially 
weak as compared with European countries. 
Large absorption of capital through activh v in 
canal and railroad construction, especially in 
1856, and through great national development 
along many lines. Enormous expansion in busi- 
ness, great prosperity and much extravagance. 
Proportion of specie to loans and to circulation 
always small. Large bank deposits prior to 
crisis but steadily increasing and finally excessive 
loans. Defective currency and unstable banking. 
No machinery by which banks could restrai 



American Civil War and Franco-German War ' 
The Chicago fire.— Gold output of United States 
for prior 16 years §735,750,000. Railway, indu 



rial and other construction work all "over th. 
world on scale previously unknown. Great pro- 
gress in development of our natural resources. 
Enormous increase in manufacturing, and agri- 
cultural activity and output, involving colossal 
absorption of capital. Limited business organ- 
ization, much destructive competition and no 

ttle looseness in business morality. National 
credit high, but monetary system imperfect and 
currency somewhat inflated. National banks 
created chiefly to insure a market for government 
through bond-secured national bank 
notes. Government became more closelv identi- 
fied with the nation's banking affairs, but no 
means provided enabling banks to check over- 
1 straining of credit. Steaclv expansions of loans, 



check capital expenditures for unwarranted ex- 1 great prosperity, a scale of living and personal 



li.in-.iuii 



ic[ business 



in 1857 S37O.OOO.O00 



Note Circulation in 



Deposits in IS 10. 



58,000,000 

I'l.uiiii.ilcni 
.'S-i,n.iii.u(in 



Excess mechandise im- 






Stock Exchange securities declined, and mar- 
ket became demoralized. High interest ruled, 
transaction of business became difficult, con- 
traction set in, and being accompanied by bank 
failures, loss of confidence ensued and sudden col- 
lapse followed. Failure of Ohio Life Insurance 
& Trust Co. on August 24, 1857, marked begin- 
_ of crisis, although panic was postponed till 
October 13. 



expenditures never before s 



Number in 1S73 . 
Bank capital in 1 
Reserves 
Note circulate 



United States 
ial Banks *Other Banks 



Gieat and rapid expansion of the West and, 
enormous railroad construction. Earnings of rail- 
roads large, on account of hauling their own sup- 
P' les tm construction, the earnings declining as 
the roads approached completion. Parallel fines 
constructed in the endeavor to compete in traffic. 
Large iron production. Tremendous inflation of , ..„ 
securities by new issues and by payment of large i tZnrh 
stock dividends. Silver question -- 
evidence as a disturbing factor, 
increasing enormously. The Tr 
War raged among the railroads, di 
ings. Considerable tariff agitati 






in her colonies and in such regions as South 

Africa and South America. Manyhighlj specu- ican war and Ru«r 

lative enterprises launched. Heavy and increas- ti..„ of San !■ ,., 

Fear of I I ilvei i id n 

1 i gold from 

"i l'/i "dull.- . , I. !, ii ■':■.,!,.. ,,l , ,,, | 



I'll!,, 



Line Rate 



National Banks 
4 2,625 

. .. -o22.M5.<)90 



; HI. OX". so'; 

"i'l.O'.O.f.iO 

1.269,862.936 

illation 22.65 



54,475 174,714 

21.775 913,117,643 

57.682 514,081,496 
18.04 



taken from Report of Comptroller ! 



High interest rate for preceding two years, 
extremely low reserves, irregularity in security 
prices and panicky conditions on the Stock Ex- 
change. Enormous amount of railway secur- 
ities placed on the market, embarrassing insti- 
tutions endeavoring to float them. Crisis in 
United States ushered in by failure on Septem- 
ber 18 of Jay Cooke & Company, followed by 
panic conditions. 



Initiated by excessive development in the! 
United States and extended all over the world. ; 



Largely due to overdevelopment in Amen 
began in Germany and became world wide. 



Runs on banks— hoarding by banks and indiv- 
iduals. Banks refused to redeem notes in specie. 
Bank notes were discounted. Interest rates 
rose to 25 per cent, and later to 100 per cent.; 
securities were unsaleable. Failures of banks, 
commercial and industrial institutions numer- 
ous, and wide spread and general busi- 
ness I stagnation ensued. Railroads tem- 
porarily suspended payments. Commodity 
prices fell from 10 to 35 per cent. 

,.»„ jTlSalahtf* t-rirVMirrri 

Gold 



Bank deposits withdrawn; loans unobtainable 
on collateral; much money disappeared from cir- 
culation; legal tender notes at 3% premium; gold 
at 106; bank failures; 9 failures in every 1.000 
commercial houses. §15,000,000 of gold im- 
ported. Stock Exchange closed tor 10 days; 
suspension of payments lasted 40 days. No in- 
dustry remained unaffected. Universal discon- 
tinuance of work, commodities dropped 20%, and 
unsalable. Treasury bought SI ' 



mg demands on capital precipitated 

abroad, signalized bythe Baring failure 

In the United States, wliile the decade 

1893 saw many railroad receiverships, there was I from recei\ 
competitive railroad building and ,i|. 

toi^i or . leb ? ln ition and extension of smaller line- In i, ; 

Bank clearings |Systems p eriod onp of varying ,„, K| ;, i(i m ■ , . , , , . . , 

, the United States, due largely to local causes, secure 8tao 
rn ' Specie payments resumed in 1S79. Silver ques- efficiency in 

tion settled in Congress, but continued disturb- tn 

mg element for 3 years. An era of unrest, landlaboi 

country was going ahead in leaps an I iiu '■ . >n ,,l\ inceinst 

agriculture and manufacturing and in , 

tion of iron and steel. A time of re.idjn , ,.,,.. ,i, 

between labor and capital and of progress in !■■. 

business concentration through organ! i . 

Usual waves of extravagance, but held somewht t 

in check by fluctuations in prosperity. Cunt- agance, while the demand 
ulative abuse of credit which banks were without I fabulous figures, 
power to control. 

Other Banks Number In 1907 



The inflated condition of things in 1881 needed 
only some severe shock to throw the country into 
a decline, which event occurred in the assassina- 
tion of President Garfield. The country rallied, 
however, from this disaster, Jay Gould making his 
famous exhibit of securities in 1882 in the vain 
effort to stay the panic. An over-weighted stock 
market was still further shaken by partial crop 
failures and a new tariff. In the beginning of 
1S84, Henry Villard failed. This was soon followed 
by failure of Jas. R. Keene, the Marine Bank, the 
Metropolitan Bank, and the house of Grant and 
Ward. This last failure was disheartening, as 
General Grant was the idol of the nation. Startling 
frauds were brought to the surface. 



id | term 

pun li ■ < ind gers 

pei iod i ounti s has evei 



i de 



Number in 

Bank Capital . ( 
Reserves 

Note circulation 
Deposits 1 



National Banks 

3,796 

59S.120 



'(. .11 III 

: \,„,'„i 



S.685 

in., .tin;. Mil 

. n.inini:otii- 



r in i 



82,297,377,4 
i prior yeais.1,871,; 



...in,; :i 



' ' 

ion; distinct 

itandardsol busini I rough 

■ni iml.Ui .1 at mil l«i lull imlilo ii i 

■ I Wholeperiod marked 

" 'iii- i. ."ill m the nation's pros- 
it it .'.nl important e as a world power, 

i Imi development of extrav- 

capital reached 



mi,,, n mi.. i 

L7.S0 

SS07. 178,26 



Notcc 

I'M'".-" . li. .. In i. toil .' . I, 

Loans ... ,585, 

Pei cspll i miilation 



v 



A severe panic convulsed France in 18 
matters did not come to a head in the United States | su: 

until 1884. All Europe felt the effects of depression. , fixates; Reading Railway and National ' ordagi 
— Company failed. Actual beginning of crisis 
July 25th, when Erie failed and Milwaukee Bank 



Issue of silver certificates beginning June, 
1890 warded off crisis initiated in England, Imi 

alarmed European investors whor® I Imer 

ican securities. Great excess of inn. 

cult to maintain national redemption fund; gold 

driven out through "endless chain;" enormous 

expansion of bank loans in West and h 

Stock Exchange securities declined 30 to 50 

per cent.; sudden contraction of loans early in 

of 1893; issue of Clearing House 



iditicns among several 

abl i v bui no ■ len 

credit resources of I In - ounl I I • 

meet E - ■ require] 

roads and industrial | 



(«•« icu uuiii iu io oj per cent.- even wheat man) «uc "i'»»»" . CT J *, ,"A, ■ I ,i„cfn> c ,ulth.tnnrl 
was unsalable through unusual han,«i ,h r , ,l' 500,000 go* eminent bonds, New Wk Clearing | ousmes witnsi 
Gold i „ | 0r t he year ended J?,ne 30, 185?; House issued $26,565,000 certificates and m 



Railroad Construction declined, Bank Clearings j suspe " ded 
decreased tremendously, and the customary failures 
were very large. Commodity prices suffered a 
severe decline, and the New York Clearing House, 
as in the panic of 1873 came to the rescue with an 
issue of Clearing House certificates. Stocks fell 
from high values to the lowest point of any date 
nee 1879. Manufacturing and commercial 



Originating in England in 1S90, it extended 
to other European nations, but did not reach the 
United States till 1893. 



basis 



Wlslatlon 



Crisis period between three and four months I Crisis P e , riod ab ? ut 3 "!S nths \ Re< i 7 er , y Q ,°" 
Recovery on Stock Exchange began wlicn 1,, I - Stock Exchange began November 13, 1873. 
resumed specie payments in December l\s', Dcnivssicn period longer than in 57 and 9i. 
Real recovery from depression, which' h^n ' Slight business revival in 1S77, marked improve- 
early in 1S59— more than two years after the ment in some trades in 1878, real recovery early 
panic— was based on the bright agricultural i i ln 1S79— year of resumption ot specie payments. 
1 ■' was somewhat affected by Improvement continued, with interruptions in 



mc — was based c. . 

'k, which however, 

unusually late frosts. 



Congress took no steps 
and banking conditions. 



1 Legislation provided i 
secured currency. 



bin inelastic bond- 



Crisis 



The usual phenomena ot runs on banks, hoard- 
ing, difficulty in securing loans. Clearing house 
i certificates issued to the amount of $41,490,000. 
shock fairly well, being on Many banks refused {o , Qnor ^ (or cash 

payments, others only paid cash for payroll pur- 

poses. Bank checks issued for currency at 4 per 

cent, premium. This stimulated hoarding to 
secure premium, but also aided gold importation. 
During August— November $51,935,111 of gold 



bj ■ominent bank- 
suspension of Knickerbocker 
I i io,t Co. and panic conditions lasting several 
days. 



Developed through similar causes coincidently 
all over the world. Had its first expression in 
the United States. 



is of short duration. The stock market 

lowest point in the fall of 1884, and in- 
creased the next year considerably, the crops in ivecL S35| 007,645 being received in August 
that year helping out the s.tua ion. Final recovery , 16Q ' nationa , ^ £ suspended and" 13 

was made dunng 1886, and plans for large under- ' - 
takings were set forth. By 1887 prosperity was 
again in full swing. 



houses 



1890. 



Various bills for reduction of the tariff defeated i Stock Exchange was at its lowest July 26th. 
in Congress, bringing increased confidence to the As soon as gold imports were assured there was 
trading public. The passing of the Interstate general recovery in prices. The acute stage of 
Commerce Act in 1887 inaugurated the policy ; t h e crisis, about forty days, ended in early Sep 
of railroad control by the government. jtember, 1893. By July 1st, 1897, general busi 

j ness revival had set in strongly. 

No broad measures for improving the currency 
system. Repeal of Silver Purchase Law on 
I October 30, 1893. 



most identical with effects of 1893; runs on 
banks; hoarding of money; banks refused to 
make loans; many loan: called and no money 
offered on New York Stock Exchange for 24 

s. Banks refused cash Co lepositOI , ind 
currency premium 31%. $74,461,027 Clear- 
ing House certificates were issued. Freedom 
from European indebtedness, premium on money 
and need of American cereals and cotton abroad 
made goltl imports impossible; over $100,000,000 
imported to January 1, 1908. 

The Secretary of the Treasury co-operated 
with an informal Bankers' Committee, headed 
by Mr. Morgan, to relieve situation; offerings 
of money on the Exchange immediately resumed ; 
Treasury increased deposits in bank at once 
$41,360,000. $25,000,000 Panama bonds and 
$15,000,000 one-year3%Certificates sold by the 
Government and used for circulation. National 
bank circulation greatly increased prior to 
and during crisis, the total outstanding on Jan- 
uary 1, being nearly $700,000,000. Emergency 
currency based on assets and commodities de- 
vised by clearing houses and groups of bankers; 
21 national banks suspended. 



FUNDAMENTAL STATISTICS 119 

if this Composite Plot and the other charts foretell 
a change for the worse, such investors sell their 
securities for cash, such merchants reduce their 
merchandise and outstanding credits, and such 
bankers reduce loans or place a large part of them 
"on call." These statistics, therefore, both serve 
as an insurance against loss and also enable men 
to be prepared to take advantage of the very low 
prices which are sure to prevail during the forma- 
tion of an area of depression below the line of 
normal growth. 



CHAPTER V. 

CONDITIONS AND EVENTS SINCE 1860 

1860 

THOUGH this year ended in a panic, the com- 
paratively favorable conditions existing dur- 
ing the first six or eight months account for 
the fact that many of its figures are about normal. 
New railroad construction amounted to 1,837 miles; 
while 821,223 tons of pig-iron were produced at an 
average price of $22.70 per ton. Bank clearings 
amounted to more than $7,231,000,000. The num- 
ber of failures was 3,676 with total liabilities of 
$79,807,000. Wages in general were high; and 
150,237 immigrants entered the country. 

With money rates high throughout the year, 
conditions became particularly strained in No- 
vember, when for the first time in the history of the 
country, clearing house certificates were issued. 
The total volume of foreign trade amounted to more 
than $687,000,000 with a considerable unfavorable 
balance. The index of English commodity prices 
for the year was 2,692. 

On the stock exchange, prices were generally low. 
Ten conservative stocks rose from 5*9 in the spring 
to 93 in October. The production of wheat 
amounted to about 173,000,000 bushels at $1.37 per 
bushel; that of corn amounted to about 838,700,000 
bushels at 73 cents per bushel; and that of cotton 
amounted to 4,861,292 bales at 11 cents per lb. 



EVENTS SINCE 1860 121 

Panic conditions began in November with the elec- 
tion of Lincoln to the Presidency and the sub- 
sequent action of the Southern States towards 
secession. 

1861 

The depression existing at the end of 1860 con- 
tinued through the first six months of this year. 
Only 660 miles of new railroad were constructed; 
and only 653,164 tons of pig-iron were produced at 
an average price of $20.26 per ton. Bank clear- 
ings decreased to the very low figure of $5,915,- 
742,000. Failures amounted to 6,993 in number 
with liabilities of $207,210,000. Wages continued 
high, while only 89,724 immigrants came into the 
country. 

Money conditions were marked by high rates 
which dropped somewhat with the improving con- 
ditions of the last six months of the year, by a fur- 
ther issue of clearing house certificates, and by a 
suspension of specie payments. The total volume 
of foreign trade decreased to about $500,000,000. 
The index of English prices for the year was 2,727. 

Prices on the stock market were low throughout 
the year. Ten stocks, selling at 84 in January, 
dropped to 62 in September. The production of 
wheat, corn and cotton decreased considerably. 
The number of bales of cotton amounted to only 
3,849,000. Wheat sold at $1.30, corn at 60 cents, 
and cotton at 13 cents. In March the Morrill 
Tariff Act was passed, levying heavier duties and 
giving an impetus to mercantile and manufactur- 
ing conditions. Thus, in spite of the beginning of 



122 BUSINESS BAROMETERS 

the Civil War, conditions improved steadily after 
the middle of the year. 

1862 

This year shows a marked improvement over 
1861. While only 834 miles of new railroad were 
constructed, 703,270 tons of pig-iron were produced 
at an increased price of $23.92. Bank clearings 
rose to $6,871,443,000. Failures amounted to 
only 1,652 in number, with $23,049,000 of liabili- 
ties, and 89,000 immigrants entered the country. 

In money matters, currency was considerably 
inflated by paper issues and money rates were low. 
The progress toward improved conditions was 
marked by a low volume of foreign trade amount- 
ing to about $350,000,000. The index of English 
commodity prices was 2,878. 

Transactions in the stock market increased and 
prices rose steadily. The ten stocks sold for 71 
in January and for 107 in November. Railroads 
prospered. Among the crops, cotton production 
amounted to 4,500,000 bales at 31 cents per lb.; 
while wheat sold at $1.28 a bushel and corn at 
60 cents a bushel. The most significant political 
feature of the year was the development of the 
policy of a heavy war tariff for revenue purposes. 
1863 

This was a year of prosperity. There were 1,050 
miles of new railroad constructed, and 846,000 
tons of iron produced at about $35 per ton. The 
Bank clearings increased to about $14,800,000,000, 
and failures decreased to 495 with liabilities of only 
$7,900,000. Immigration amounted to 174,000. 



EVENTS SINCE 1860 123 

Money conditions were temporarily aided by 
measures of Congress providing for a further cur- 
rency inflation, and gold exportation was increased 
considerably. Foreign trade increased to over 
$447,000,000. The English index of prices was 
3,492 as against 2,878 for the preceding year. 

On the stock exchange a fever of speculation 
brought about a considerable increase in transac- 
tions and an advance in prices. Ten stocks rose 
from 106 in the spring to 153 in the fall. Wheat 
sold for $1.16 and corn for 84 cents; 1,600,000 bales 
of cotton were produced at an average price of 67 
cents per lb. Railroad earnings increased and the 
first horse car line was constructed in New York. 
Congress passed the Internal Revenue Act to in- 
crease the war revenue. In general the Northern 
troops were successful. 

1864 

Prosperity conditions, at full height in the be- 
ginning of the year, showed marked evidences of 
instability in the last months. Only 738 miles of 
new road were constructed, while pig-iron produc- 
tion amounted to 1,014,282 tons, and the price rose 
to the phenomenal point of $59 per ton. Bank 
clearings nearly doubled those of the preceding year 
amounting to more than $24,000,000,000. Failures 
increased slightly to 520 in number with liabilities 
of $8,579,000, while immigration amounted to about 
200,000. 

Inflation of currency and exportations of gold 
continued to an abnormal degree and money rates 
rose. Foreign trade increased to over $475,000,000. 
The index of English prices was 3,787. 



124 BUSINESS BAROMETERS 

Before the end of the year prospects, as marked 
by these abnormal figures and conditions strained 
by the corner in connection with the stock of the 
Harlem River R.R., appeared so unsatisfactory that 
many began to sell their stocks. Average prices of 
securities for the year were higher than in 1863. 
Ten stocks, selling at about 150 in January, fell 
to 138 in June and rose again to 155 in December. 
Cotton production amounted to about 450,000,000 
bales selling at the extraordinary price of $1.00 per 
lb. Wheat sold at $2.00 per bushel and corn at 
$1.44 per bushel. The general condition of inflation 
was marked further by high wages and increased 
dividend payments by railroads. In politics, 
Lincoln was re-elected to the Presidency. 
1865 

Conditions were unstable and unsatisfactory 
during this year. While 1,177 miles of new road 
were constructed, the production of pig-iron de- 
creased sharply to 831,776 tons, selling at $46 a ton. 
Bank clearings increased slightly to $26,000,000,- 
000. Failures numbered 530 with liabilities of 
$17,625,000. The number of immigrants increased 
to 247,453. 

Money rates remained high, but did not increase. 
Paper money issues were somewhat contracted and 
reserves were increased. Foreign trade fell off to 
about $400,000,000, and the index of English com- 
modity prices dropped to 3,575. 

On the stock exchange the price of the ten stocks 
fell from 158 in the spring to 125 in the fall. 
Railroad earnings were erratic in behavior. The 



EVENTS SINCE i860 125 

production of cotton jumped up to 2,228,987 bales, 
selling at S3 cents per lb.; while wheat and corn 
were at $2.04 and $1.26 per bushel respectively. 
Conditions steadily declining during the first of the 
year, improved somewhat with the surrender of 
Lee, but became unsteady again with the death of 
Lincoln. The year was, on the whole, one of panic. 
1866 

Depression followed the panic of the previous 
year. 1,716 miles of new railroad were constructed 
while 1,205,663 tons of pig-iron were produced at a 
price of $46.84 per ton. Bank clearings increased 
slightly to $28,717,000,000. Business failures in- 
creased 300%, amounting to 1,500 in number with 
liabilities of $53,783,000. Immigrants coming to 
the country amounted to 314,917. 

Banking conditions were rather more settled, and 
money became easier with the close of the war and 
the slight improvement in fundamental conditions. 
Foreign trade increased to more than $780,000,000 
and exports of gold somewhat decreased. Commod- 
ity prices in general were low. The English index 
figure was 3,564. 

In the stock market the decline in prices of the 
preceding year continued. The average for the ten 
stocks went as low as 99. The first official crop 
report of the national government gave a produc- 
tion of about 152,000,000 bushels of wheat sold at 
$2.20; 867,946,000 bushels of corn sold at 90 cents 
per bushel, and 2,059,000 bales of cotton sold at 
43 cents per lb. Though, as shown by these figures, 
fundamental conditions appeared to be somewhat 



126 BUSINESS BAROMETERS 

improving, still the surface conditions especially 
evident in the action of the stock market were de- 
cidedly depressed. 

1867 

During this year, though depression still existed, 
still improvement was plainly visible. There were 
2,249 miles of new railroad constructed, and 1,305,- 
023 tons of pig-iron produced at $44.08 per ton. 
Bank clearings amounted to $28,675,159,000, and 
failures increased to 2,780 with liabilities of $97,- 
000,000. Immigration amounted to 310,965. 

Monetary conditions showed a slight improve- 
ment over those of the previous year. Gold expor- 
tations decreased and rates were somewhat lower. 
Foreign trade amounted to $690,266,237 in vol- 
ume with a balance of $61,337,308 of imports. The 
English commodity price index was 3,024. 

On the stock market the price of the ten stocks 
ranged from 98 to 128. Railroad earnings im- 
proved. 2,498,895 bales of cotton sold at $3.15 per 
lb.; 768,320,000 bushels of corn sold at $1.21 per 
bushel; and 212,441,400 bushels of wheat, a con- 
siderable increase over the previous year, sold at 
$3.33 per bushel. Confidence was strengthened 
by the purchase of Alaska and by the opening of 
new territories in anticipation of the coming pros- 
perity. 

1868 

This was a year of marked prosperity. New 
railroad construction increased to 2,979 miles; and 
1,305,023 tons of iron were produced at $39.25 per 
ton. Bank clearings amounted to $28,484,288,000. 



EVENTS SINCE 1860 127 

The number of failures decreased to 2,608 with total 
liabilities of $63,694,000; and the number of immi- 
grants decreased to 138,840. 

Money rates were slightly higher. The excess 
of gold exports amounted to $51,217,027 or five 
millions more than that of the previous year. The 
volume of foreign trade amounted to $639,389,339 
with a balance in favor of imports amounting to 
$87,000,000. The English commodity price index 
was 2,682. 

The market became active. Ten stocks rose from 
108 to 147. While the cotton crop was much the 
same as that of the previous year, the wheat crop 
increased to 224,036,000 bushels selling at $2.43 per 
bushel; and the corn crop increased to 906,527,000 
bushels selling at $1.23 per bushel. While general 
conditions were thus improving, the prices of stocks 
and the conditions of the stock market were ren- 
dered uncertain by the great contest being waged 
between Drew and Vanderbilt for control of the 
Erie, in which the former won virtually by loading 
an issue of convertible bonds upon the Erie, and 
then immediately converting the bonds. This 
and certain other unfortunate incidents left the 
fundamental conditions of the stock market at the 
end of the year quite unsatisfactory. 
1869 

This was the year of the "Black Friday" panic, 
a panic of the stock market which, in spite of pros- 
perity in other branches of business, served to 
render conditions unsound. Miles of new railroad 
amounted to 4,615, and 1,711,287 tons of pig-iron 



128 BUSINESS BAROMETERS 

were produced at $40.61 per ton. Bank clearings 
increased to $37,407,028,000. Failures numbered 
2,799 with liabilities increased to $75,054,000. The 
number of immigrants increased to 352,768. 

The money market was affected somewhat by the 
manipulations of the stock market. Money rates 
though firm, were high. The excess of gold ex- 
portations decreased to only $17,990,000, while the 
balance of trade in favor of imports increased to 
$101,079,906. The English commodity price index 
was 2,666. 

On the market, ten stocks, at 160 in the early 
summer, fell to 114 in the fall. The Union Pacific 
was completed and railroad earnings in general were 
good. In crops there were 3,000,000 bales of cotton 
at $.29 per lb. ; 874,000,000 bushels of corn at $1.02, 
and 260,146,000 bushels of wheat at $1.50. With 
the general conditions of prosperity, came a great 
westward movement. As was the case, however, 
with the Harlem corner in 1864, the "Black Friday" 
panic of this year seemed to create a wound that 
would not heal, so that although business continued 
to increase and surface conditions appeared to be 
more favorable, fundamental conditions grew more 
and more unsatisfactory every day. The leading 
bankers and merchants who were studying these 
underlying conditions and watching the relation 
between actual and normal figures, disposed of their 
securities and reduced their merchandise. 
1870 

Prosperity continued through this year in spite 
of the unsatisfactory monetary conditions at the 



EVENTS SINCE 1860 129 

close of 1869. There were 6,078 miles of new road 
constructed, and 1,665,000 tons of iron produced at 
$33.23 per ton. Bank clearings, to be sure, declined 
to $27,804,000,000; and failures increased in num- 
ber to 3,546; but wages were high and immigra- 
tion amounted to 387,000. 

In the money market, rates remained firm, al- 
though money was easier than it had been in 
the preceding year. The excess of gold exports 
amounted to $42,673,184, while the excess of im- 
ports of merchandise decreased to $57,546,000, and 
the volume of foreign trade was $864,730,176. The 
English commodity price index was 2,689. 

The stock market, though steady, dropped during 
the year, so that ten stocks selling for 120 in the 
spring, were selling at about 102 in December. 
Wheat was somewhat decreased in both price and 
production as compared with 1869; but a phenome- 
nal corn crop amounting to 1,094,255,000 bushels, 
sold at $1.02; and the cotton crop increased to 
4,352,317 bales selling at $.239 per lb. The year 
as a whole was looked upon by the business men as 
prosperous. 

1871 

In this year the miles of new railroad amounted 
to 7,379, while 3,930,000 tons of iron were produced 
at $35.00 a ton. Bank clearings rose to $29,300,- 
000,000. The number of failures fell to only 2,915 
with liabilities of .$85,000,000. The number of 
immigrants during the year was 321,350. 

Monetary matters showed the effects of the 
weakening underlying conditions. Money was not 



130 BUSINESS BAROMETERS 

as easy as in the preceding year. The excess of 
gold exports amounted to $39,074,000; while the 
volume of foreign trade amounted to $963,043,862 
with an excess of imports of $112,739,000. The 
English commodity price index for the year was 
2,590. 

On the stock exchange the ten stocks rose during 
the year from 103 to 117. Railroad gross earn- 
ings per mile were $9,040 an unduly high figure. 
Crops were not as good as those of the preceding 
year. Cotton amounted to less than 3,000,000 
bales selling at $.169, corn to 991,898,000 bushels 
selling at $.77, and wheat to 230,722,000 bushels 
selling at $1 .60. Added to the decline in crops were 
other factors which hastened panic conditions which 
were soon to follow. The Chicago fire, coming 
in this year, shook confidence and helped to in- 
crease money rates. In political circles much cor- 
ruption sprang up; and the Tweed Ring exposures 
produced a still further disquietude and lack of 
confidence. 

1872 

The general decline which had begun in 1871 was 
in this year somewhat checked by a number of 
causes. New construction declined to the more 
nearly normal figure of 5,878 miles; and the produc- 
tion of iron increased to 2,548,000 tons selling at 
about $49. This great increase of iron production 
was probably due to the perfection of commercial 
methods of making Bessemer and open hearth steel, 
greatly increasing the demand for all grades of pig- 
iron, but especially the lower grades. Bank clear- 



EVENTS SINCE 1860 131 

ings increased to $33,844,000,000. Failures num- 
bered 4,000 with $121,000,000 of liabilities. More 
than 400,000 immigrants came to this country. 

Money conditions were not altogether satis- 
factory. The banks were carrying a very small 
surplus reserve. The excess of exports of gold in- 
creased to more than $57,000,000. The volume of 
foreign trade amounted to something over $1,000,- 
000,000 with an excess of imports amounting to 
$187,000,000. The English commodity price index 
was 2,835. 

Speculation was active on the stock exchange. 
Ten stocks dropped from about 110 in January to 
about 97 in December. Gross railroad earnings 
per mile fell to $8,116. Crops were rather better 
than in the preceding year; but money rates were 
higher. Money was not easy, wages were high and 
strikes were disturbing confidence. In politics a 
revision of the tariff and a presidential election 
made conditions still more uncertain. Although 
this was a year of apparent prosperity, students of 
fundamental statistics, who had not already done 
so, now saw that the area of prosperity was practi- 
cally consumed, and immediately liquidated. 
1873 

The Boston Fire of November 1872 precipitated 
the panic which overwhelmed the business world 
in this year. New construction declined to 4,097 
miles, though iron production increased slightly to 
2,560,000 tons and sold at $42.79 a ton. Bank clear- 
ings rose to $35,461,052,000. Business failures in- 
creased to 5,000 with liabilities almost $100,000,000 



132 BUSINESS BAROMETERS 

more than those of the year before. More than 
450,000 immigrants came into the country. 

Monetary matters were so unsatisfactory, and 
bank failures were so serious that clearing house 
certificates had to be issued. The excess of gold 
exports decreased from $57,000,000 to less than 
$5,000,000; while in volume foreign trade increased 
to $1,164,000,000 and in excess of imports it de- 
creased to $27,000,000. The English commodity 
price index rose to 2,947. 

On the stock exchange panic conditions were even 
more evident than elsewhere. The ten stocks fell 
as low as 75. Gross railroad earnings declined to 
$7,947 per mile. Crops were fair. The cotton 
production amounted to 4,000,000 bales and sold 
at $.20 a lb. Corn production amounted to 932,- 
000,000 bushels, and wheat to 281,000,000 bushels; 
and sold at $.63 and $1.76 respectively. Money 
rates were very high, being 7% in New York for 
time loans. The Pacific Railroads, opened in the 
year 1869, were largely owned in New England and 
the promoters of both State Street and Wall Street 
had been borrowing money heavily of the insurance 
companies. These loans the insurance companies 
were now obliged to call. Moreover, the preceding 
year was the culmination of the Erie tragedy when 
James Fiske was shot and Erie stocks were struck 
from the New York Stock Exchange. Money had 
been very high in 1872 and men of affairs clearly 
saw at the beginning of 1873 that it would be im- 
possible to continue business under existing con- 
ditions and that a house cleaning would be nee- 



EVENTS SINCE 1860 133 

essary. Consequently, when crop reports contin- 
ued to point to small harvests, which later turned 
out to be about 100,000,000 bushels less than the 
preceding year, and when the number of failures 
showed a distinct increase, things were allowed to 
seek their own level. That is, the large bankers 
and merchants withdrew their support and busi- 
ness began to decrease immediately. 

Conditions at this time are interesting to study 
as they show clearly the three steps in the progress 
of a decline and the precipitation of a crisis : first, 
the large bankers and merchants sell their securi- 
ties and reduce their merchandise, while the public 
is very optimistic; second, after some special event 
has taken place, in this case the Boston fire, which 
convinces these bankers and great merchants that 
the time has come for a house cleaning, they with- 
draw their support, although the people are still 
bullish and the ordinary store-keeper is borrowing 
money to buy goods; and third comes the panic it- 
self, which in the case of the great panic of 1873 
caused the failure of J. Cook & Co., and many 
other firms. This panic made imperative the 
closing of the New York Stock Exchange from 
September 18 to the 30th. This third step is the 
beginning of the decline in the eyes of the ordinary 
merchant, manufacturer and laborer. And in real- 
ity, until this third phase comes, there is no decline 
in surface conditions, although fundamental con- 
ditions have been unsatisfactory for a year or more, 
during which time bankers and merchants who 
study fundamental conditions, have been preparing 
for the depression. 



134 BUSINESS BAROMETERS 

1874 

In this year panic passed into depression. New 
railroad construction declined to 2,117 miles; and 
the production of pig-iron fell off somewhat, to 
2,400,000 tons selling at only $30. Bank clearings 
declined to $22,800,000,000. Failures increased 
in number to 5,830; and immigration declined to 
300,000 persons. 

Surplus reserves in the banks increased. Gold 
exports showed an excess of $35,700,000 over im- 
ports; and of a total volume of foreign trade 
amounting to $1,153,689,000, exports exceeded 
imports by $7,700,000. The English index figure 
for commodity prices was 2,891. 

The ten conservative stocks rose from the 75 of 
the preceding year to 100 in the summer of this 
year, only to fall back to 93 in December. Gross 
railroad earnings per mile fell off to $7,513. Many 
roads were in the hands of receivers, and railway 
affairs were shaken by adverse legislation. Crops 
declined to a total for corn and wheat of 1,213,500,- 
000 bushels. Granger laws, political investigations 
and the prosecution of certain prominent promot- 
ers, tended to place a check on the growth of 
public confidence. 

1875 

Depression continued throughout this year, and in 
fact through the succeeding four years. Only 1,711 
miles of railroad were constructed, the smallest 
number in ten years; and iron production dropped 
to 2,000,000 tons with the price at $25 a ton. Bank 
clearings showed a slight increase, amounting to 



EVENTS SINCE 1860 135 

$25,000,000,000. Failures, however, increased in 
number to 7,740 and in liabilities to $201,000,000. 
Immigration declined still further to 227,000. 

In monetary matters, with the excess of gold ex- 
ports at $39,000,000 the balance of trade was again 
"in our favor" to the amount of $7,794,000 though 
the volume of trade had declined to $1,046,000,000. 
The index figure for English commodity prices was 
2,778. 

On the stock exchange stocks were irregular and 
declining in price. Ten stocks averaged 100 high 
and 87 low. Gross railroad earnings amounted 
to $7,010 per mile, showing a considerable falling 
off, and both the Erie and the Wabash defaulted 
interest on their bonds. Money continued high 
and confidence was greatly upset. The crops, 
however, were much better than in the preceding 
year. Cotton production amounted to 4,669,000 
bales at $.154 per lb. Corn amounted to 1,321,- 
069,000 bushels at $.84; and wheat amounted to 
292,136,000 bushels at $1.33. This fact of better 
crops together with the business depression, re- 
lieved somewhat the money market, and rates 
gradually decreased. 

1876 

In this year the depression reached its low ebb. 
Liquidation was very thorough. New construc- 
tion, to be sure, rose somewhat to 2,712 miles; but 
iron production decreased to 1,868,000 tons selling 
at $22.19 a ton. Bank clearings declined to only 
$21,597,000,000. Failures rose to 9,092 in number 
with liabilities of $191,117,786; and immigration 
declined to 169,986. 



136 BUSINESS BAROMETERS 

Owing to the thorough liquidation, money was 
becoming easier. Only $7,555,000 of gold was ex- 
ported in excess of imports ; and in foreign trade the 
decline in volume to $1,001,000,000 was due to a 
decline in imports which raised the excess of exports 
to $163,319,000. The English commodity price 
index was 2,711. 

The tendency of the stock market was down- 
wards. Ten stocks, selling at 100 in the spring, 
dropped to 62 in the winter. Railroad earnings 
continued their decline to a gross per mile of $6,764. 
Crops were again about the same as the year before 
in yield, with prices slightly lower. Money rates in 
New York on time loans had declined to 5%; and 
abroad, to 3J%. In politics the Presidential elec- 
tion and the Hayes-Tilden dispute disturbed confi- 
dence. In fact, the public had become very much 
discouraged. All who had been connected with 
stocks had lost their money, prominent bankers and 
merchants had failed, railroads were carrying traffic 
at a loss, mills and factories were idle. Money rates 
were less than at any time since 1860. 

These facts showed that the pendulum had swung 
too far. But knowing that business conditions are 
like the pendulum which, after wide swings in either 
direction, tends to resume a normal position in re- 
sponse to the laws of gravity, investors and mer- 
chants who were studying the conditions and com- 
paring figures saw clearly that this was the year 
in which to buy stocks, make plans for further 
extensions, and prepare for the period of improved 
conditions which was bound to come. In fact, the 



EVENTS SINCE 1860 137 

stocks which these investors sold at an average of 
160 a share in 1869, many now purchased at an 
average of 62 a share, while others who waited 
until the beginning of the following year purchased 
at an average price of 52. 

1877 

Though the depression continued, improvement 
in underlying conditions was well under way. New 
railroad construction amounted to 2,274 miles; and 
pig-iron production increased to 2,066,000 tons 
selling at $18.92. Failures remained about the 
same in number as in the preceding year. Strikes 
were common owing to reductions in wages, and 
immigration continued its decline in numbers to 
141,000. 

In monetary matters the excess of gold exports 
decreased to $7,352,000; while the volume of for- 
eign trade increased slightly, and the excess of 
exports decreased to $140,000,000. Commodity 
prices, as indicated by the Economist's index 
figure, declined to 2,715. 

On the stock exchange, ten stocks dropped during 
the spring and summer to 48, but began to rise in 
the fall, selling at 76 in December. Gross rail- 
road earnings per mile declined to $6,380; and net 
per mile to $2,307. Crops were good: 4,811,000 
bales of cotton sold at $.118 per lb.; 1,342,000,000 
bushels of corn sold at $.59 per bushel; and 364,- 
194,000 bushels of wheat sold at $.163 per bushel. 
In politics, the silver agitation, as usual with all 
currency disputes, tended to retard improvement. 
But though the country was in extreme depression 



138 BUSINESS BAROMETERS 

at the beginning of the year, still, with the good 
crops, railroad earnings and confidence improved, 
and money rates gradually decreasing, Christmas 
1877 was a time of thanksgiving for many who had 
escaped being crushed during the preceding five 
years. 

1878 

In spite of the signs of improvement in the year 
preceding, this year, though continuing the im- 
provement, was still in depression. New construc- 
tion increased to 2,665 miles; and iron production 
rose to 2,301,000 tons with the price per ton at 
$17.67. Bank clearings declined slightly to $22,- 
508,000,000. Failures increased in number to 
10,478, and in liabilities to $234,000,000. Immi- 
gration declined still further to the low point of 
138,000. 

Monetary affairs reflected the improvement which 
was under way. The volume of foreign trade re- 
mained the same as in the preceding year; but the 
excess of exports increased to $305,000,000, and 
the gold movements showed an excess of imports 
amounting to $1,821,000. The London Econo- 
mist's commodity figure of 2,554 indicated the 
general tendency of commodity prices to remain 
low. 

The stock market was still unsteady and inactive. 
Only 39,875,000 shares were traded on the New 
York Exchange. Ten stocks fell from 76 in the 
spring to 61 in the winter. Net railroad earnings 
per mile, however, showed an increase to $2,375. 
The crops of corn and cotton were about the same as 



EVENTS SINCE 1860 139 

those of the preceding year; while the wheat crop 
increased to 420,000,000 bushels and dropped in 
price to $1.24 per bushel. In politics, the silver 
dispute was continued over the Bland-Allison bill ; 
and certain changes were made in the Bankruptcy- 
Law. On the whole, the confidence of the public 
and of the business world was returning. 
1879 

During this year, depression passed into pros- 
perity. New construction jumped to 4,809 miles; 
and iron production increased to 2,741,000 tons 
selling at $21.72. Bank clearings increased to 
$25,000,000,000. Failures decreased remarkably 
to 6,658 in number, and only $98,149,000 in liabili- 
ties. Immigration increased somewhat to 177,800 
in number. 

In the field of money, the volume of foreign 
trade increased to $1,156,000,000, the excess of 
exports amounted to $251,557,000, and the excess 
of gold imports to $74,652,000. Commodity prices 
were still low. The English index figure for the 
year was 2,225. 

On the stock market, the ten stocks rallied from 
66 to 106, and transactions nearly doubled. Net 
railroad earnings increased to $2,610 per mile. 
Crops were as follows: cotton, 5,057,000 bales selling 
at $.108 per lb.; corn, 1,547,000,000 bushels selling 
at $.47 per bushel; and wheat 448,000,000 bushels 
selling at $1.24 per bushel. In New York, time 
loan money rates were at 5%, and in Europe, at 
3%. In accordance with the Specie Payments 
Act of 1875, specie payments were again resumed 



140 BUSINESS BAROMETERS 

in this year. In fact, the entire year witnessed an 
improvement so marked that at the end of the 
twelve months, mills were in full operation, all labor 
was employed, and the entire country was in a 
very prosperous condition. 
1880 

This was the first of a series of four years of 
marked prosperity. New railroad construction 
increased to 6,711 miles, and pig-iron production 
amounted to almost 4,000,000 tons selling at $28 
a ton. Bank clearings jumped to $37,000,000,000. 
Failures decreased still further to only 4,735 in 
number or .63 of 1% of all the firms in business, 
with one exception the lowest point on record. 
The number of immigrant arrivals increased to 
457,000. 

In money matters, the volume of foreign trade 
increased to $1,503,000,000, and the balance "in 
favor of" the United States amounted to $192,- 
876,000. Excess of gold imports amounted to 
$70,582,000. Commodity prices improved as il- 
lustrated by the English index figure of 2,538. The 
average surplus reserve of the New York banks de- 
clined from $46,800,000 in 1879 to $6,100,000 in 
this year. 

On the New York Stock Exchange, transactions 
increased from 72,000,000 to almost 98,000,000 
shares. The ten stocks rose from 87 to 131. Net rail- 
road earnings increased to $3,029 per mile. Crops 
were excellent; 6,589,000 bales of cotton selling at 
$.115 per lb.; 1,717,434,000 bushels of corn selling 
at $.55 per bushel and 498,000,000 bushels of wheat 



EVENTS SINCE 1860 141 

selling at $1.30 per bushel. Confidence reigned 
throughout the country; consolidations were in 
progress; new industries were started; new rail- 
roads were projected ; and every one was elated over 
the fact that the country was once more prosperous. 
Moreover, Garfield the candidate for the Republi- 
can party, always representative of business inter- 
ests, was elected President in November. Money 
was constantly in more demand, and the rates were 
gradually increasing. 

1881 

Although the general public considered this year 
one of great prosperity, there were certain events 
which caused the barometers of fundamental con- 
ditions to begin to decline, and before the year 
closed, said fundamental conditions were unsatis- 
factory. Thus, new construction rose to the ab- 
normal figure of 9,846 miles; while production of 
pig-iron declined somewhat as well as the price. 
Clearings jumped to more than $48,000,000,000. 
Failures increased in number to 5,582. The num- 
ber of immigrant arrivals amounted to 669,431. 

Money conditions, too, were not altogether 
satisfactory. The volume of foreign trade in- 
creased slightly, and the balance "in favor of" 
the country decreased as did the excess of gold im- 
ports. In the New York banks the surplus re- 
serve fell to $4,500,000. Commodity prices were 
somewhat lower as indicated by the English index 
figure of 2,376. 

Transactions on the New York Stock Exchange 
amounted to more than 114,000,000 shares. The 



142 BUSINESS BAROMETERS 

ten stocks selling at an average price of 125 in 
January, fell to 110 in June and rose again to 137 
in December. Railroad net earnings declined 
slightly to $2,928 per mile, being due in part to the 
Trunk Line Rate War. Money rates abroad in- 
creased to 4% and at home to 6% on time loans. 
The crops decreased considerably in yield, wheat and 
corn together amounting to less than 1,600,000,000 
bushels. Tremendous stock issues were being 
floated, and large stock dividends were being de- 
clared. While to outsiders everything appeared to 
be very prosperous, yet to the careful student it was 
plain that conditions were not what they should 
be, and needed only some sudden disturbing event 
to start disaster, such an event as the Harlem corner 
in 1864 and the Boston fire in 1872. This sudden 
event turned out to be the shooting of President 
Garfield on July 2, 1881, after which event, the 
bankers and merchants who kept careful watch 
of conditions decided to sell. 
1882 
Fortunately for those who had not already liqui- 
dated, prosperity conditions continued in many 
of the important lines during this year and the 
next. New railroad construction amounted to 
11,569 miles, or next to the largest new mileage for 
any year in the history of the country; and iron 
production was correspondingly inflated to 4,- 
623,323 tons, selling at $25.77 per ton. Bank clear- 
ings decreased slightly to $46,500,000,000. Failures 
numbered 6,738 with liabilities of $101,547,564. 
Immigration rose to the abnormal figure of 788,992. 



EVENTS SINCE 1860 143 

Monetary matters were also uncertain. Gold 
movements showed a return of excess of exports 
amounting to more than $25,000,000; while the 
volume of foreign trade declined to $1,475,000,000 
and the excess of exports declined to $15,138,000. 
The surplus reserve of the New York banks declined 
still lower than in 1881, to $3,500,000. The London 
Economist's commodity price figure for the year 
was 2,435. 

On the New York Stock Exchange, transactions 
increased to 116,300,000 shares. The ten stocks 
fell to a low point of 94 in the early summer and 
rose again to 134 in the winter. Railroad earnings 
decreased to a net per mile of $2,670. Crops, how- 
ever, the real redeeming feature of the year, were 
better than in 1881. The cotton crop of 6,992,- 
000 bales, sold at $.115 per lb. Corn amounting to 
1,617,000,000 bushels, sold at $.77 and wheat, 
amounting to 504,000,000 bushels, sold at $1.32 
per bushel. Owing chiefly to these crops, although 
a decline had set in, it was not perceived by the 
general public. As mentioned in the account of 
the year 1873, there are three steps in every de- 
cline; and the second, that in which the leaders 
withdraw their support, had not come, for this 
was the year in which Jay Gould made his famous 
exhibit of securities. As will be seen by referring 
to the newspapers of that day, it was clearly under- 
stood by students of conditions that a distinct de- 
cline had begun, and Gould probably knew this 
as well as any man. Therefore, although he was 
preaching that the conditions were perfectly sound 



144 BUSINESS BAROMETERS 

and that still greater prosperity was ahead, he 
himself was doubtless unloading and liquidating 
with all possible speed in preparation for the public 
withdrawal of his support later. Moreover, the 
banks were aiding their directors by keeping down 
money rates although the demand for money was 
very great. Students of fundamental statistics, 
however, could not be misled, and knowing that 
the area of prosperity was rapidly being consumed, 
prepared for trouble. 

1883 

Though nominally considered a year of pros- 
perity, this was in truth a year of decline and in- 
stability of underlying conditions. New construc- 
tion fell off to 6,745 miles, and iron production to 
4,595 ,000 tons. Bank clearings in this year, for the 
first time published for the whole country instead of 
for New York alone, amounted to $51,699,823,000. 
Failures increased in number to 9,184 and 
in liabilities to $172,800,000. Immigration also 
showed a decline. 

Money conditions were supported by a large 
volume of foreign trade, amounting to $1,547,000,- 
000. The balance in favor of this country in- 
creased to $108,000,000, and excess of gold imports 
due to gold purchases from abroad amounted to 
$16,000,000. The New York bank reserves were 
still low, being about $4,200,000. The English 
commodity price index fell to 2,281. 

The stock market held up remarkably well, 
although the high prices were maintained only 
through manipulation and in order to allow the in- 



EVENTS SINCE 1860 145 

siders the opportunity to liquidate. Ten stocks 
fell from 121 to 103. Railroad earnings increased 
slightly both in gross and net. Money rates in 
New York averaged 6J% and in Europe, 3J%. 
Crops, too, were poorer than in the preceding year, 
the yield of wheat and corn combined amounting to 
less than 2,000,000,000 bushels. On the whole, 
these facts, added to agitation over tariff and in- 
ternal revenue questions, rendered business condi- 
tions abnormal and unsound, and clearly foretold 
the panic about to follow. 

1884 

The unsound conditions of the preceding year 
were reduced, in this year, to panic conditions by the 
great Ward and Grant failure on May 6, together 
with the failures of Henry Villard and James R. 
Keene. New construction declined to 3,923 miles, 
and iron production was reduced by about 500,000 
tons. Bank clearings decreased to $44,000,000,000. 
Failures rose to 10,968 in number with $226,000,000 
of liabilities. Immigration also declined to 500,000 
in number. 

In foreign trade, both exports and imports 
decreased. The balance "in favor of" this country 
was $120,000,000; but gold movements showed an 
excess of exports amounting to $12,990,000. The 
New York banks held a large surplus reserve of 
$20,800,000. Commodity prices fell as illustrated 
by the English index figure of 2,195. 

On the stock market, artificial support being re- 
moved from money conditions, stock prices fell 
rapidly. The ten stocks sold at 115 in the spring. 



146 BUSINESS BAROMETERS 

and 80 in the summer and fall. Net railroad earn- 
ings declined to $2,318 net per mile. Crops, how- 
ever, were again good, corn and wheat amounting 
to over 2,300,000,000 bushels. If it had not been 
for the good crop reports during this year, probably 
stocks would have declined very much further. As 
it was, even the election of Grover Cleveland by 
the Democrats in November did not seem to break 
the market very severely. 

1885 

Depression, as usual, followed the panic, in this 
year. Only 2,975 miles of new railroad were con- 
structed; and iron production declined to 4,044,000 
tons, selling at $18. Bank clearings declined to the 
low figure of $41,400,000,000. Failures were slight- 
ly lower than in 1884 both in number and in liabili- 
ties. Immigration figures declined to 395,346. 

In monetary matters, the volume of foreign trade 
decreased to $1,319,700,000 and the balance "in 
favor of" the country decreased to $100,000,000. 
Gold movements showed an excess of imports of 
$12,200,000. The average surplus reserves in the 
New York banks rose to the enormous sum of 
$48,000,000. The English commodity price index 
was 2,023. 

The stock market was comparatively active. 
The ten stocks rose from 83 to 113. There was 
a considerable issue of new stocks and bonds 
amounting together to $567,500,000. Railroad 
earnings dropped to the low figure of $2,185 net per 
mile. Money rates in New York dropped from 
6% to 5J% on time loans. The crops were rather 



EVENTS SINCE 1860 147 

better than in the preceding year, but prices were 
considerably lower. In politics, the silver agita- 
tion rather increased the general weight of depres- 
sion which existed throughout the year. 
1886 

General depression continued in this year, though 
improvement was well under way before its close. 
New construction jumped up to 8,000 miles; while 
iron production increased to 5,683,000 tons selling 
at $18.70. Bank clearings, too, increased to $49,- 
000,000,000 and failures decreased somewhat both 
in number and in liabilities. Immigration de- 
creased slightly to 334,203. 

In the monetary field money was easier. The 
volume of foreign trade remained about the same; 
but the balance between exports and imports of 
both gold and commodities was much reduced. The 
abnormal average surplus reserves of the New York 
banks in 1885 was in this year reduced to $14,200,- 
000. Commodity prices in general were the same 
as indicated by the English index figure of 2,023. 

The New York Stock Exchange was active during 
this year. Transactions amounted to more than 
100,000,000 shares, and ten stocks rose from 102 
to 123. Money rates in New York dropped to 4% 
and the banks began pretty commonly to buy bonds. 
Railroad earnings improved both in gross and net ; 
and crops were about the same as in the preceding 
year in yield, but somewhat lower in prices. Cot- 
ton sold for $.092 per lb., corn for $.52 per bushel 
and wheat for $.89 per bushel. A period of im- 
provement had commenced, and although many 



148 BUSINESS BAROMETERS 

small merchants were only beginning to feel the 
effects of the great depression, true conditions were 
distinctly more than normal and the pendulum 
was swinging too far the other way. In view of 
this, stocks began to rally and plans for extensions 
and large undertakings were again discussed. More- 
over, the defeat of the various bills which were in- 
troduced into Congress for the reduction of the 
tariff caused a special increase of confidence among 
manufacturers, wholesalers and bankers. Money 
rates also, remaining normal, greatly encouraged 
new enterprises. 

1887 

This year ushered in a new period of prosperity. 
New railroad construction amounted to 12,876 
miles, the largest figure in the history of the country; 
while pig-iron production increased to 6,417,148 
tons selling at $21 a ton. Bank clearings rose to 
$51,000,000,000, and failures amounted in number 
to 9,634 or .90 of 1% of all the firms in business. 
Impelled by the tide of prosperity, immigration 
increased to 490,000. 

The volume of foreign trade also showed a 
marked increase due chiefly to an increase in im- 
ports, as is generally the case in a period of prosper- 
ity. Consequently the balance of trade favoring ex- 
ports decreased to $6,000,000; but the excess of gold 
imports increased to $35,700,000. Surplus reserves 
were still further reduced, and prices began to rise. 
The London Economist's commodity index for the 
year was 2,087. 

The stock market was rather less active than in 



EVENTS SINCE 1860 149 

the preceding year, and the prices of the ten stocks 
fell from 124 to 104 in the summer and fall, owing 
doubtless in part to the approaching presidential 
election and the doubt and hesitation which is 
always reflected in business circles with the ap- 
proach of this process in politics. But railroad 
earnings improved, the net per mile being $2,444; 
and money rates were normal. Moreover, while 
the yields of corn and wheat together amounted to 
less than 2,000,000,000 bushels, the cotton yield 
increased from 6,500,000 bales of the year before 
to 7,000,000 in this year. In politics, government 
control of railroads was inaugurated in this year 
by the passing of the Interstate Commerce Act. 
1888 

Owing to satisfactory fundamental conditions, 
prosperity made rapid progress in this year in spite 
of the fact that it was a "presidential year." New 
construction amounted to 6,900 miles, and iron 
production increased slightly to 6,489,000 tons. 
Bank clearings were about normal at $49,484,000,- 
000; and failures, though increased in numbers, 
were decreased in total liabilities. The number 
of immigrant arrivals increased to 546,000. 

Monetary conditions were interesting. While 
exports decreased, imports increased enough to in- 
crease the total volume of foreign trade to $1,419- 
000,000. Consequently there was at the end of the 
year a balance of trade "unfavorable" to the United 
States amounting to $33,600,000 and a resulting 
excess exportation of gold amounting to $23,500,- 
000. Domestic money rates remained at 5%, but 



150 BUSINESS BAROMETERS 

surplus reserves in New York banks increased to an 
average reserve of $17,000,000. The English index 
figure for commodity prices rose to 2,458. 

The inactivity of the stock market during this 
year can probably, as in the fall of 1887, be ascribed 
largely to the approaching presidential election. 
The ten stocks stood at 102 until the election was 
ended, and then bounded up to 129 in December. 
In fact, with the election of the Republican candi- 
date, General Harrison, business in general showed 
a marked improvement. The net railroad earn- 
ings for the year amounted to $2,045 per mile, a 
low figure. Total crops, too, showed no great in- 
crease, though the total wheat and corn crops 
amounted to 2,400,000,000 bushels. 
1889 

This was a year of prosperity. New railroad con- 
struction was normal at 5,000 miles; while iron pro- 
duction increased to 7,600,000 tons selling at $17.70 
a ton. Bank clearings rose to $56,000,000,000, and 
failures increased somewhat. Immigration de- 
clined to 444,000. 

In monetary affairs, the volume of trade was 
only slightly larger than in the preceding year; but 
the balance turned again "in favor of" this country 
amounting to an excess of exports equal to $56,- 
580,000. Exportations of gold, however, continued 
to exceed imports, in this year, by $38,900,000. Sur- 
plus reserves of the banks were somewhat below 
normal. As indicated by the index figure of the 



EVENTS SINCE 1860 151 

London Economist which was 2,362 for this year, 
commodity prices had somewhat dropped. 

On the stock exchange, transactions showed an 
increase. Ten stocks rose from 123 in the spring 
to 144 in the fall. Domestic time loan rates con- 
tinued at 5%, while those abroad were at 3%. 
The net earnings of railroads still remained low. 
Crops, however, were excellent, especially those of 
corn and cotton, which were the largest in the his- 
tory of the country thus far. The cotton crop of 
7,313,720 bales sold at $.106 per lb.; the corn crop 
of 2,112,800,000 bushels sold at $.59 per bushel; 
and the wheat crop of 490,000,000 bushels sold at 
$.94. 

1890 

In this year, sound prosperity changed to an 
"uncertain prosperity," which was to continue for 
two years longer, during which time, while surface 
conditions looked satisfactory, fundamental condi- 
tions were far from sound. New construction 
amounted to 5,427 miles, and pig-iron production 
increased to 9,000,000 tons selling at $18. Bank 
clearings also rose to $60,500,000,000, and failures 
increased only slightly. Immigration showed little 
change. 

In monetary matters, the volume of foreign 
trade increased to $1,647,000,000 and the excess 
of exports amounted to $34,000,000. Exports of 
gold exceeded imports by only $3,800,000. Surplus 
reserves in the New York banks fell to the low 
average figure of $3,700,000. The English com- 
modity price index figure, 2,247, shows a still further 
drop in prices. 



152 BUSINESS BAROMETERS 

The stock market conditions were peculiar. 
Railroad earnings rose to a net per mile of $2,162. 
The cotton crop was unusually large, amounting to 
8,600,000 bales; but the wheat and corn crops fell 
off considerably, amounting together to only 1,900,- 
000,000 bushels. Money rates in this country rose 
to 6% and abroad to 4%. The ten stocks which 
remained above 140 until the fall suddenly dropped 
then to 98. This drop marked what may be 
called a "surface panic," brought on by the great 
Baring- Failure at which time clearing house cer- 
tificates were issued to relieve the pressure on the 
banks. Public confidence and courage, greatly 
agitated by this panic, was still further disturbed 
during the year by the political discussions which 
ended in the passing of the McKinley Tariff Act 
and the Silver Purchase Act. 
1891 

In spite of the generally favorable surface 
conditions of this year, confidence was not fully 
restored. New railroad construction decreased to 
4,026 miles, and pig-iron production fell off nearly 
a million tons. Bank clearings also declined to 
$69,000,000,000; and failures increased to 12,273 
in number with liabilities of $189,868,000. Immi- 
gration increased to 560,319. 

Foreign trade continued to develop, amounting 
in volume to $1,729,000,000 with a balance of 
$142,000,000 in favor of the United States. Gold 
exports increased correspondingly to an excess over 
imports of $34,000,000. Surplus reserves in the 
New York banks rose to $1 1 ,000,000. The English 



EVENTS SINCE 1860 153 

index figure of commodity prices declined to 2,207. 

On the stock market, the issue of new securities, 
which had amounted to the large figure of $1,1 22,- 
800,000 in 1890, declined in this year to $476,500,- 
000. The Exchange was dull. Ten stocks sold 
around 95 until the late summer, when they rose 
rapidly to 138. Railroad earnings remained much 
the same as in the year preceding. Crops, however, 
were phenomenally large. The cotton crop of 
9,000,000 bales sold at $.086 per lb. The corn crop 
of 2,000,000,000 bushels sold at $.67 per bushel. 
The wheat crop of 611,000,000 bushels sold at 
$1.05 per bushel. These fine crops caused the 
newspapers to be especially bullish, and enabled 
bankers and merchants to keep money rates from 
advancing further and to bolster up the market in 
order to unload their securities and merchandise. 
In fact, most people believed this a very satisfactory 
year. Students of fundamental statistics, how- 
ever, clearly saw that the area of prosperity was 
about consumed and prepared for trouble. 
1892 

The prosperity of this year, so-called, was large- 
ly due to artificial causes. New construction 
amounted to only 4,441 miles, while the produc- 
tion of pig-iron rose to 9,000,000 tons and its price 
fell off to $ 1 5 .75 per ton. Bank clearings continued 
their increase to $61,919,000,000; failures declined 
in number to 10,344 and in liabilities to $114,000,- 
000, and immigration figures rose to 523,000. 

In monetary matters, though the commodity ex- 
ports exceeded imports by $97,000,000, still there 



154 BUSINESS BAROMETERS 

was an exportation of gold in excess of imports 
amounting to $59,000,000. The New York banks' 
average surplus reserve amounted to $15,600,000. 
Commodity prices in this country, as indicated by 
Bradstreet's index figure of 7.77 which began in this 
year, were fairly high, while in England the index 
figure of 1,207 indicates that there they were 
low. 

On the New York Stock Exchange, transactions 
increased to 85,875,000 shares. Ten stocks fluc- 
tuated between 122 and 142, beginning and ending 
the year at about 135. Net railroad earnings per 
mile declined to $2,068. Crops were much smaller 
than in the preceding year, corn and wheat together 
amounting to less than 2,150,000,000 bushels. In 
short, it was clearly evident to students of fun- 
damental statistics that the area of prosperity was 
more than consumed, and those, who had not 
already liquidated, sold securities, merchandise and 
everything else possible in preparation for a period 
of depression to last until 1897. 
1893 

Questionable prosperity passed readily into panic 
with the great failure of the National Cordage Co. 
on the 4th of May. The collapse was complete. 
New construction dropped to 2,346 miles; and iron 
production amounted to only 7,000,000 tons. 
Bank clearings in like manner fell off to $54,000,- 
000,000; failures increased to 15,000 in number with 
liabilities of more than $346,000,000; and immigra- 
tion, though not so quickly affected as these other 
subjects, declined to 502,917. 



EVENTS SINCE 1860 155 

In monetary affairs, both exports and imports 
of commodities declined; and while the excess of 
exports increased slightly to $99,800,000, the excess 
of gold exports declined to $6,900,000. The aver- 
age surplus reserve of the New York banks in- 
creased to $21,600,000. Bradstreet's index figure 
of American prices dropped to 7.53 while the Eng- 
lish figure rose slightly to 2,113. 

The stock exchange was dull and, of course, de- 
clining. Ten stocks dropped from 130 to 98. 
Railroad earnings showed no particular change 
from the year before; and money rates dropped in 
New York to 5J%. Unfavorable crop reports, 
which had increased the collapsing tendency during 
the year, were fully substantiated by the final re- 
ports. To be sure, cotton was a little better than 
in the preceding year, and corn showed only a 
slight decline, but wheat had dropped off from 
500,000,000 bushels to 396,000,000 bushels selling 
at the decreased price of $.739 a bushel. In fact, 
support of all kinds had been withdrawn, and every 
commodity, including money, was allowed to seek 
its own level. 

1894 

In this year the inevitable period of depression 
following a severe panic began in earnest. New 
railroad construction declined to only 1,899 miles, 
and the production of iron amounted to only 6,- 
600,000 tons. In like fashion bank clearings de- 
clined to $45,000,000,000; failures were still high 
at 13,885 in number, though liabilities decreased 
to $172,900,000; and immigration declined to 
314,467. 



156 BUSINESS BAROMETERS 

Monetary matters showed the same depression. 
The volume of foreign trade declined to $1,547,000,- 
000 while the excess of exports increased (through 
a decided decrease in imports) to $1,500,000,000. 
Excess of gold exports jumped up to $80,000,000 
and bank reserves in the New York banks in- 
creased to $45,900,000. Commodity index prices 
dropped in America to 6.43 and in England to 
2,002. 

On the New York Stock Exchange only 49,000,000 
shares were traded. The ten stocks rose to 123 
in the summer and fell back again to about 105 
in the winter. Railroad earnings fell to $1,803 
per mile, net, the lowest figure on record. Crops, 
too, were exceptionally poor. Cotton, to be sure, 
amounted to 9,800,000 bales in yield, but it sold at 
the low price of $.069 per lb. ; and corn and wheat 
together yielded less than 1,700,000,000 bushels. 
In reality this year witnessed the greatest crop 
failure in the history of the country. The crops 
had fallen below 1,600,000,000 bushels during the 
70s, yet a very much smaller area was then under 
cultivation and conditions were entirely different. 
As figures clearly show, a small increase or decrease 
in crops does not affect business excepting senti- 
mentally; but a great failure such as was witnessed 
in 1894 gives the country a shock from which it may 
take several years to recover. In addition to the 
crop failures, the Pullman strike occurred in this 
year, and the Wilson bill affecting the tariff was 
also passed; in fact, 1894 was apparently the worst 
year since the Civil War. 



EVENTS SINCE 1860 157 

1895 

This year began in great gloom. The depression 
of the preceding two years, during which so many 
bankers and merchants had failed and one-third 
of the total railroad mileage of the United States 
had fallen into the hands of receivers, began to 
have its effects upon all labor and even upon the 
most humble store-keeper. Mills were shut down, 
great poverty existed in the cities, and distress was 
everywhere felt. New railroad construction de- 
clined to 1,700 miles. Iron production, however, 
had improved both in yield and in price, amounting 
to 9,000,000 tons and selling at $13 a ton. Bank 
clearings, too, showed a gain to $53,000,000,000; 
and failures decreased slightly in number. Only 
279,948 immigrants entered the country. 

The total volume of foreign trade showed a slight 
increase over the preceding year, but the balance 
"in favor of" the United States declined to $23,- 
000,000. Still, the gold exports continued in large 
amounts, exceeding the imports by $70,500,000; 
and the surplus reserves, though reduced from the 
figures of the year before, were still high. Com- 
modity prices remained about the same as in 1894 
in this country, and dropped somewhat in England. 

The stock market was rather more active; but 
again the ten stocks rose to about 128 in the sum- 
mer only to fall back to about 105 in the winter. 
Railroad earnings were $1,804 per mile net, or 
practically the same as in 1894. But crops were 
somewhat improved. The cotton yield of 7,000,- 
000 bales sold at $.074 per lb,; the corn crop of 



158 BUSINESS BAROMETERS 

2,000,000,000 bushels sold at $.477 per bushel; and 
the wheat crop of 467,000,000 bushels sold at $.669 
per bushel. And added to the fair crops, there was 
the low domestic money rate of 3£% to lend aid to 
an improvement. In fact, conditions would doubt- 
less have taken a turn for the better had it not been 
for the very unfortunate condition of finance, and 
the great exportation of gold. Although President 
Cleveland did everything within his power to up- 
hold the gold standard and the credit of the United 
States, the drain was too heavy especially after his 
famous Venezuela message, and the threatened pos- 
sibility of war with our greatest foreign creditor, 
England. 

1896 

This year business was still depressed from the 
panic of 1893 and the heavy gold exportations of 
1894-5. New railroad construction declined to 
1,654 miles, the low figure for the depression ; and 
iron production declined to 8,600,000 tons selling 
at $13 a ton. Bank clearings decreased to $51,- 
000,000,000. Failures increased considerably to 
15,000 in number with total liabilities of more than 
$226,000,000. Immigration amounted to 343,267. 

In monetary matters, the volume of foreign trade 
increased to $1,687,000,000 and the excess of ex- 
ports jumped up to $324,000,000. In gold move- 
ments, imports exceeded exports $46,400,000. The 
American index of commodity prices dropped to 
the low point of 5.91. 

The New York Stock Exchange was dull in trans- 
actions, but listed more than $1,000,000,000 of 



EVENTS SINCE 1860 159 

new securities about equally divided between bonds 
and stocks. The ten stocks once more rose and fell 
between 119 and 100. Railroad earnings in- 
creased to $1,840 per mile net. Money rates on 
time loans in New York, owing to the currency 
troubles of the preceding year and the spring of this 
year, rose from 3% to 6%. Though the wheat crop 
itself declined somewhat, the total of corn and 
wheat amounted to more than 2, 700,000,000 bushels 
and cotton yielded 8,000,000 bales. Therefore, 
although there were no signs of better times in sur- 
face conditions, fundamental conditions were be- 
coming much sounder. Had it not been for the 
alarm felt at the Democratic nomination of Bryan 
in June, this would have been from its very begin- 
ning a year of distinct improvement ; and when the 
election of McKinley in the fall of 1896 had re- 
moved this cause of distrust, bankers and mer- 
chants who were studying the situation became con- 
vinced that a change for the better was imminent. 
In fact, it was evident from a study of fundamental 
statistics that the area of depression was about 
consumed, and a period of prosperity was due. 
They therefore purchased securities and (mer- 
chandise in large quantities, and later made great 
profits thereby, as the major bear movement com- 
mencing in 1892 was at an end. 
1897 
Distinct improvement characterized this year. 
New railroad construction increased to 1,822 
miles, and the production of pig-iron amounted, to 
9,400,000 tons. Bank clearings increased to 



160 BUSINESS BAROMETERS 

$57,000,000,000 and failures decreased in number 
from 1.31% of all the firms in business to 1.26%. 
Immigration amounted to 230,832. 

Monetary matters were more sound. The for- 
eign trade increased to $1,842,000,000; and the 
excess of exports to $357,000,000. Gold exports 
again exceeded imports but only to the small amount 
of $253,000. Surplus reserves in the New York 
banks averaged the high figure of $38,600,000. 
Commodity prices in this country rose as shown by 
Bradstreet's index figure of 6.11. 

The stock market was more active, but the ten 
stocks continued much the same range of fluctua- 
tions they had passed through in the last three 
years. Domestic money rates returned to the 3 \°/ 
of 1895, and railroad earnings continued to improve. 
Crops, too, remained strong. Though corn showed 
a decrease, wheat increased to 530,000,000 bushels 
and cotton increased to 11,000,000 bales. The 
three sold respectively at $.319, $.954 and $.07. 
When the Dingley Tariff Act had brought an end 
to anxiety in that field, it was discovered that the 
country was well on the road to prosperity. 
1898 

Everywhere prosperity reigned. New construc- 
tion amounted to 2,219 miles, while iron produc- 
tion increased to 11,700,000 tons selling at $19. 
Bank clearings jumped up to $68,000,000,000; 
failures decreased to 12,000 in number; and 230,000 
immigrants entered the country. 

In monetary affairs, the volume of foreign trade 
still showed an increase due to the great increase 



,. 



EVENTS SINCE 1860 161 

in exports in spite of the fact that imports had 
somewhat declined. Exports which had amounted 
to only $824,000,000 in 1895 had increased steadily 
with the improving crops until in this year they 
amounted to $1,255,000,000 or rather more than 
two-thirds of the total volume. Imports of gold 
increased correspondingly to the immense figure of 
$142,000,000. Surplus reserves showed a decline 
from the abnormally high figures of the preceding 
year. American commodity prices continued to 
rise as indicated by Bradstreet's index figure of 
6.57. 

The New York Stock Exchange reported trans- 
actions amounting to 112,000,000 shares, and new 
securities listed amounting to $1,228,000,000 of 
which 700,000,000 were bonds. The ten stocks rose 
from a low point of 106 in the spring to a high 
point of 130 in the fall. Net railroad earnings 
jumped up to $2,111 per mile. Once more money 
rates were normal, time loans in New York averag- 
ing 4%. The crops, too, kept pace with the advanc- 
ing prosperity, for cotton amounted to 11,200,000 
bales, corn to 1,900,000,000 bushels, and wheat to 
675,000,000 bushels. Although the Spanish War 
temporarily disarranged business, it was so short 
that it acted in the end as a great stimulus to trade. 
1899 

Conditions, already prosperous, continued to 
improve throughout this year. New mileage 
amounted to 4,000 miles; iron production advanced 
to 13,600,000 tons. Bank clearings showed a 
phenomenal growth to $94,000,000,000, while 



162 BUSINESS BAROMETERS 

failures decreased to 9,337 in number or only .81 
of 1% of all the firms in business. The number of 
immigrants increased to 311,715. 

Monetary conditions showed a similar strength. 
The volume of foreign trade amounted to more 
than $2,000,000,000 and the balance sheets showed 
an excess of exports amounting to $476,000,000. 
Money rates at home and abroad were 4%, and the 
excess of importation of gold amounted to only 
$6,000,000. Commodity prices in this country 
and in England showed an increase as indicated by 
Bradstreet's index figure of 7.21 and the Econo- 
mist's figure of 1,973. 

On the New York Stock Exchange, transactions 
increased to 176,000,000 shares, while the issue of 
new securities amounted again to nearly $1,230,- 
000,000. The ten stocks continued their rise from 
123 to 150. Net railroad earnings increased to 
$2,272 per mile. Though the cotton and wheat 
crops showed a decline, corn increased so that the 
total bushels of corn and wheat together again 
amounted to more than 2,600,000,000 in number. 
Industry in all lines was again firmly on its feet. 
In reaction against the cut-throat competition 
which had existed all through the depression just 
ended, and had thoroughly exasperated business 
interests, a great movement towards consolidation 
in industries and towards "integrating trusts" 
began in earnest with this burst of prosperity. In 
fact, this year saw the beginning of many of our 
largest trusts and monopolies in their present form 
of organization. 



EVENTS SINCE 1860 163 

1900 

With the turning of the century, prosperity was 
in full swing. To be sure some of the figures in the 
fundamental subjects showed a slight decline as 
compared with those of 1899, but this was rather 
a hopeful sign than otherwise for the prospects of 
the continuation of good times. Thus new railway 
construction declined to 3,444 miles, while pig-iron 
production remained high at 13,789,000 tons selling 
at $20 a ton. Bank clearings, too, declined to 
$86,000,000,000, but this was still $20,000,000 
greater than the clearings of two years before. Fail- 
ures numbered at 10,700 with liabilities of $138,495,- 
000. Immigration increased to 448,570 in number. 

In monetary matters, while the total volume of 
trade advanced to $2,300,000,000, the balance "in 
favor of" this country reached to $648,800,000, the 
largest balance of this kind in the history of the 
country. Imports of gold exceeded exports by $12, - 
600,000. Bank reserves were normal. In com- 
modity prices, Bradstreet's figure rose to 7.88 and 
the Economist's to 2,178. 

The stock market continued active in transac- 
tions and new securities. Though suffering the 
usual spring slump of this period, the ten stocks 
rose from a low point of 134 to a high point of 
165. Net railroad earnings advanced to $2,519 
per mile. Domestic money rates strengthened to 
5% on time loans. Crops were again firm both 
in yield and in price. Corn and wheat together 
amounted to 2,260,000,000 bushels and sold re- 
spectively at $.804 and $.453 per bushel. The re- 



164 BUSINESS BAROMETERS 

election of McKinley and the enactment of the 
"Gold Standard" bill gave additional impetus to 
business. Everywhere consolidation was the rule, 
especially in the railroads, where "community of 
interests" was becoming common. 
1901 

Prosperity was running riot. New construc- 
tion increased to 4,481 miles, while iron produc- 
tion advanced to 15,800,000 tons selling at $16. 
Bank clearings bounded up to $109,267,000,000 and 
failures remained about the same as in 1900. New 
immigrants increased somewhat in number to 
487,900. 

A slight increase came in the total volume of 
foreign trade, but the excess of exports decreased 
somewhat. The latter fact was due to an increase 
in imports, and the excess of gold exports which 
came in this year amounted to $3,000,000. Bank 
reserves were still about normal, though tending to 
decline. Commodity prices both in this country 
and in England declined as indicated by the respec- 
tive index figures of 7 t .57 and 2,014. 

The activity of the stock market was extreme. 
On the New York Exchange more than 265,000,000 
shares were traded, and more than $2,565,000,000 
of new securities were issued, of which the majority 
were stocks. This was the year when a partial 
panic in the market was caused by the Northern 
Pacific stock corner, and most stocks suffered from 
artificial manipulation. The ten stocks, which we 
have used constantly heretofore, rose from 150 
to 190 almost in a month, only to recede again in 



EVENTS SINCE 1860 165 

the fall with the shooting of McKinley. Mean- 
while net railroad earnings continued their increase 
to $2,688 per mile; and money rates and crops re- 
mained strong. To be sure the corn crop de- 
creased somewhat, but the wheat crop increased 
from 500,000,000 to 748,000,000 bushels. Still, 
fundamental conditions were not satisfactory, the 
"prosperity" area, as shown by the Composite 
Plot, was nearly consumed, and the cautious 
investors were changing their positions to the 
"bear" side of the market. 
1902 

This was a year when the average business man 
and manufacturer were very optimistic; when the 
daily papers were prophesying still higher prices 
and still greater activity, and when the surface 
conditions were apparently more satisfactory than 
ever before. Yet underlying conditions, especially 
those illustrated by the figures on "new securities 
issued," were far from sound. In fact, had it not 
been for gigantic crops, a severe depression would 
probably have set in at once. In mercantile condi- 
tions, new railroad construction amounted to 
4,195 miles while iron production increased to 
17,800,000 tons, selling at the advanced price of 
$22 a ton. Bank clearings increased to $118,000,- 
000,000 while failures remained abnormally low at 
11,615 in number or only .93 of 1% of all the firms 
in business. Immigration increased to 648,743. 

Monetary conditions showed a slight increase in 
the total volume of trade, but a decrease to $391,- 
000,000 in the excess of exports, due, again, entirely 
to an increase in imports. Gold imports exceeded 



166 BUSINESS BAROMETERS 

exports by $8,000,000. Bank reserves were ab- 
normally low, those of the New York banks aver- 
aging only $10,700,000. American commodity 
prices showed a distinct gain indicated by Brad- 
street's index figure of 7.97, but English prices were 
falling. 

The New York Stock Market, though not so 
active as in 1901, still reported transactions 
amounting to 188,000,000 shares, and new securi- 
ties listed amounting to $1,317,000,000. Thus in 
two years new securities had amounted to almost 
$4,000,000,000. Men who recognized the meaning 
of this tremendous increase in new securities issued, 
knew that a day of reckoning must come soon. 
Meanwhile, the ten stocks rose from a low point of 
168 to 200. Net railroad earnings continued to 
increase to $2,830 per mile. A slightly decreased 
wheat crop was reinforced by an increase in corn 
amounting to 1,000,000,000 bushels, so that the 
total crop of wheat and corn amounted to more than 
3,150,000,000 bushels. Cotton remained about 
the same as in 1901. But even these excellent 
figures could not save the unsound conditions of 
the money and stock markets. Furthermore, 
confidence was unsettled by severe anti-trust agi- 
tation and certain government prosecutions of 
trusts. These facts, together with a study of the 
Composite Plot of fundamental conditions, clearly 
showed students of the situation that the area of 
prosperity was again consumed, and another de- 
pression was again imminent, although it was 
generally believed that this "area" represented 



EVENTS SINCE 1860 167 

only a minor movement, and that the major move- 
ment, beginning in 1897, was still upward. 
1903 
Shaken confidence and unstable stock market 
conditions resulted in the so-called "Undigested 
Securities Panic" of this year, in which few figures 
of fundamental subjects were radically altered ex- 
cept those directly related to the stock market. 
Thus new railroad construction advanced to 4,397 
miles, and the production of pig-iron to 18,000,- 
000 tons. Bank clearings declined slightly to 
$109,000,000,000. Failures increased in number 
to 12,069 or 1.12% of all the firms in business. Im- 
migration advanced to 857,000. 

In monetary matters the volume of foreign trade 
advanced to $2,480,000,000 and the balance "in 
favor of" this country amounted to $489,000,000. 
Excess of gold imports increased to $20,900,000. 
Bank reserves increased somewhat. American 
prices remained strong at 7.92 and English prices 
strengthened. 

On the New York Stock Exchange, transactions 
declined to 161,000,000 shares, but the issue of new 
securities continued to be large at $1,088,000,000. 
In the past six years more than $8,000,000,000 of 
new securities had been turned loose on the market. 
The ten stocks fell during the year from 190 to 
149. Net railroad earnings continued their steady 
increase per mile to $2,887. Crops declined to no 
great extent from those of 1902. In justice to 
those statisticians who found no signs forecasting a 
depression in this year, it must be said that these 



168 BUSINESS BAROMETERS 

figures were not extremely unsatisfactory. In 
fact, had it not been for the very great increase in 
vsecurities, there probably would have been no de- 
pression of 1903. However, owing to the stock 
market troubles, labor troubles, and certain other 
conditions, this year was one of depression. 
1904 

That the panic of 1903, like that of 1890, was not 
fundamental in its effects is pretty clearly shown by 
the fact that prosperity, not depression, followed 
immediately in 1904. New railroad construction 
continued to increase to 5,059 miles, though iron 
production declined to 16,497,000 tons selling at 
$15.50 a ton. Total bank clearings also increased 
to $112,600,000,000; and failures, though increased 
slightly in actual numbers, declined in percentage 
of firms in business to .92 of 1%. Immigration 
almost held its own at 812,870. 

Monetary matters showed firm banking condi- 
tions. The volume of foreign trade again increased 
and owing to a marked increase in imports and a 
slight decrease in exports, the balance "in favor of" 
the country decreased to $415,000,000. Once more 
gold exports exceeded imports, in this year, by $36,- 
000,000. The average surplus reserve of the New 
York banks rose from $12,000,000 to $28,000,000. 
Commodity prices remained much the same as in 
1903. 

The stock market was again active, though the 
issue of new securities on the New York Exchange 
declined to $710,900,000 of which more than 500,- 
000,000 was bonds. The ten stocks rose again 



EVENTS SINCE 1860 169 

from their fall to 150 in 1903 to their former high 
point of 190. Net railroad earnings increased to 
$2,980 per mile. Time loan rates dropped to 4% 
in this country and 3J% abroad. In crops, cotton 
amounted to the largest yield on record of 13,- 
506,000 bales, selling at $.117 per lb.; corn amount- 
ed to 2,467,000,000 bushels selling at $.594 per 
bushel; and wheat amounted to 552,000,000 bushels 
selling at $1.07 per bushel. In this year, Roose- 
velt's administration was continued by his election 
to the office of presidency, and the attention of the 
whole world was attracted to the Russo-Japanese 
War. 

1905 
Prosperity continued in increasing and unparal- 
leled measure. New railroad construction amount- 
ed to 4,900 miles, and pig-iron production jumped 
to 22,990,000 tons selling at $18 a ton. Bank 
clearings advanced to $143,900,000,000 while fail- 
ures declined in number to 11,520. Immigration 
increased rapidly to 1,026,000 persons. 

Both volume of foreign trade and excess of export, 
showed an advance, and $3,498,000 were imported 
in excess of gold exports. The average surplus re- 
serve of the New York banks declined to only $10,- 
400,000. The American index figure of commodity 
prices advanced to 8.09. 

The stock market was very active. On the New 
York Exchange, transactions amounted to 263,- 
000,000 shares, and new securities listed amounted 
to a billion and a half dollars, of which nearly a 
billion were in bonds. The ten stocks in this 



170 BUSINESS BAROMETERS 

year, had an unprecedented rise from 180 to 206. 
Net railroad earnings advanced to S3, 129 per mile. 
Though the cotton crop declined 2,000,000 bales, 
the wheat and corn crops were both larger than in 
1904, amounting together to more than 3,400,000,- 
000 bushels. Though surface conditions appeared 
wonderfully prosperous, confidence was badly 
shaken by the Life Insurance and Traction Com- 
pany exposures of this year. 
1906 

Prosperity was abnormally inflated. New con- 
struction in this year amounted to 10,682 miles, 
and iron production advanced to 25,000,000 tons 
selling at $21. Bank clearings were the second 
largest on record, increasing to $159,800,000,000, 
while failures declined in number to only 10,600 or 
.77 of 1% of all the firms in business. Immigra- 
tion amounted to 1,100,000. 

In monetary affairs the volume of foreign trade 
amounted to $3,118,000,000, a figure exceeded only 
once in the history of the country, that once being 
in 1907. The balance "in favor of" this country 
increased to $477,000,000; while the excess of gold 
imports, aided by artificial importation, amounted 
to $108,000,000. The average surplus reserve of 
the New York banks dropped to only $7,500,000. 
Commodity prices advanced as shown by the 
American index figure of 8.42. 

On the stock exchange, transactions increased, 
and prices continued abnormally high. The ten 
conservative stocks dropped from the high in 1905 
to a low point of 163 in the fall. Railroad net 



EVENTS SINCE 1860 171 

earnings advanced to $3,129 per mile. Crops were 
tremendous. Cotton yielded 13,000,000 bales at 
$.115; corn yielded 2,927,000,000 bushels at $.560; 
and wheat yielded 735,000,000 bushels at $.865. 
Such satisfactory crop conditions, however, only 
served to increase the mad pace which prosperity 
had assumed, and students of conditions were not 
satisfied. Liquidation, therefore, commenced, se- 
curities and merchandise were sold, and stocks of all 
classes declined in price. The money situation was 
especially strained, as the depression of 1903 was 
not severe enough to liquidate many accounts 
which should have been cleared up. In fact, con- 
ditions were far from satisfactory at the end of the 
year. This was the year of the San Francisco 
Earthquake and the culmination of the major bull 
movement beginning in 1897. 
1907 

In this year prosperity, carried to an extreme 
point, collapsed in panic. But, as is usual, the 
change in conditions was not apparent except 
to those students of fundamental statistics who 
clearly saw by the Composite Plot that the area of 
prosperity was about consumed, and that we had 
entered another period of liquidation which might 
not end for several years. New construction in- 
creased to 5,499 miles, while iron production ad- 
vanced to 25,000,000 tons selling at an average 
price of $24. Bank clearings, however, declined to 
$145,000,000,000, and failures increased in number 
to 11,725. Immigration advanced to 1,285,000. 

In monetary affairs, the total volume of foreign 



172 BUSINESS BAROMETERS 

trade continued its increase to the unparalleled 
figure of $3,315,000,000; the balance from excess of 
exports decreased slightly to $446,000,000; and in 
gold movements the excess of imports declined to 
$88,000,000. The bank reserves were everywhere 
extremely low, those in New York averaging only 
$400,000. This together with abnormally high 
commodity prices, as illustrated by Bradstreet's 
index figure of 8.90, showed money conditions to be 
highly unsatisfactory. 

The stock market, always a sensitive barometer 
of all changes, declined decidedly from the begin- 
ning of the panic in March. On the New York 
Exchange, transactions amounted to only 196,- 
000,000 shares, and new securities, to only $997,- 
000,000. The ten stocks which had temporarily 
recovered from their severe decline in 1906, dropped 
again from a high point of 182 in March to a low 
point of 119. Railroad net earnings continued 
their increase to the high point of $3,700 per mile, 
held up by crops and the volume of trade. Crops 
declined somewhat from the bumper crop of 1906, 
but were still excellent. Wheat and corn together 
amounted to more than 3,200,000,000 bushels and 
sold at $.963 and $.640 respectively. Domestic 
rates on time loans advanced nearly to 6%, while 
rates abroad advanced to 4|%. Legislation ad- 
verse to trusts and railroads added to the general 
consternation in business circles, and before the end 
of the year, the country had dropped from over- 
active prosperity into dull depression. 



EVENTS SINCE 1860 173 

1908 

Depression had, in this year, extended from the 
stock market to other lines of business. New 
building was at a very low ebb. Although 3,918 
miles of new railroad were constructed, only 
15,900,000 tons of pig-iron were produced, and 
there was little new building construction. Pig- 
iron sold at about $17.70 per ton. Bank clearings 
declined to $132,272,000,000 and failures increased 
in number to 15,690. The condition of the labor 
market is shown by the fact that only 782,870 
immigrants entered the country, although wages 
still held up. 

As has been universally true in the past, such 
a period of depression is accompanied by low money 
rates. The surplus reserves held by the banks were 
very large throughout the entire year and the per- 
centage of cash was high. Not only were rates low 
in the United States but also throughout Europe. 
The volume of foreign trade amounted to $2,869,- 
282,000 and the balance of trade in favor of the 
United States amounted to $636,383,466, while 
gold movements showed an excess of exports 
amounting to $30,939,163. The demand for money 
was still further lessened by a distinct decrease in 
commodity prices, the Bradstreet's Index de- 
clining to 7.72 in June. 

The stock market remained almost as depressed 
as in 1907 both in transactions and new securities 
listed, but by November the prices began to show a 
distinct rise. Thus the ten stocks, which had re- 
mained under 125 all during the summer, rose in 



174 BUSINESS BAROMETERS 

the late fall to 164. Railroad net earnings de- 
clined to $3,144 per mile. Fortunately, crops re- 
mained good. Cotton, yielding 13,408,000 bales, 
sold at $.106 per lb.; corn yielding 2,668,000,000 
bushels sold at $.786; and wheat yielding 664,000,- 
000 bushels sold at $.786. In politics a temporary 
currency bill was passed to meet the depressed 
conditions; while Mr. Taft's election to the Presi- 
dency secured the continuation of the Republi- 
can administration and policy. The depression 
had passed the low point, giving place to marked 
improvement. In fact, by the spring of the next 
year, the area of semi-depression was completed. 
1909 

Though still suffering from the depressing busi- 
ness conditions following the panic of 1907, this 
was a year of apparent improvement. New rail- 
road construction increased to more than 6,000 
miles, and the production of pig-iron showed a 
decided advance to 25,800,000 tons selling at about 
$18. Bank clearings also advanced to $165,600,- 
000,000, and failures decreased in number to 12,924. 
Immigration continued low at 751,786 new ar- 
rivals. 

In monetary affairs, money rates continued at a 
low level, as is usual in depressions following a 
panic. But the volume of foreign trade advanced 
to more than $3,000,000,000, due entirely to an 
increase in importations, while the excess of exports 
decreased to $251,800,000. Once more gold ex- 
portations exceeded imports, reaching in this year 
the high point of $88,793,000. Bank reserves 



EVENTS SINCE 1860 175 

declined from the high figures of 1908 to more 
normal figures. Bradstreet's index figure of com- 
modity prices advanced to 8.51. 

The stock exchange was again thoroughly active. 
In New York, transactions amounted to more than 
204,000,000 shares, while new securities listed in- 
creased to $2,424,000,000, almost equally divided 
between stocks and bonds. The ten stocks rose 
from 154 to 189. It should, however, be kept in 
mind that, notwithstanding the great uplift in prices 
since 1907 , this is probably only a rally in a bear 
market, and we may not see our lowest prices until 
the major movement culminates, which may not be 
until 1912 or later. Railroad earnings, though lower 
in the gross, increased in the net to $3,188 per mile 
as a result of economies introduced during the de- 
pression. Though crop reports in the early part 
of the year were unsatisfactory, the final figures 
showed a decline in only cotton, while wheat and 
corn were good. Cotton yielded more than 10,000,- 
000 bales selling at $.116 per lb. ; corn yielded 2,772,- 
000,000 bushels selling at $.743 a bushel; and wheat 
reached the high point of 737,000,000 bushels selling 
at $1.20 per bushel. These figures signify that the 
country enjoyed a temporary improvement, as would 
be expected after the conditions of 1907 and 1908. 
1910 

During the first few months of this year mer- 
cantile conditions forged ahead in a fashion that 
bade fair to precipitate a premature period of forced 
liquidation, and undoubtedly was the direct cause, 
through fundamental channels, of the stagnant 
period which followed during the summer in most 



176 BUSINESS BAROMETERS 

lines; although, in this dullness, the Interstate Com- 
merce Commission interference with the railroads 
in their attempt to raise rates played an important 
part. In fact, it was only the slowing up of busi- 
ness, as general conditions became increasingly 
unsound which saved the situation. Thus, new 
railroad construction which had amounted to more 
than 6,000 miles in 1909, declined somewhat; and 
iron production, which averaged 2,500,000 tons for 
the first four months of the year, averaged only 
2,100,000 tons for the remaining months, while the 
price fell from $19.00 to less than $16.00 before the 
end of the year. Bank clearings declined to about 
$163,722,000,000, and liabilities in failures in- 
creased by an average of 2,000,000 a month over 
those of 1909. The number of immigrants in- 
creased to over 1,000,000 in number. 

The fundamental figures in monetary conditions 
showed most clearly the unsound condition of the 
country, which could not have withstood the strain 
of a continued advance in mercantile affairs. 
Thus, money rates were forced up from their low 
level of 1909, marking a strained money market 
fully a month earlier than the usual rise due to 
crop movements. Foreign trade during the first 
eight months of the year showed an unfavorable 
balance, and showed a marked improvement only 
in the last months. At the same time, the excess 
of gold exports during the first of the year was 
considerable, but for the whole year declined to 
a moderate sum. The loans of the New York 
Clearing House banks averaged more per month 
for the twelve months of the year than the deposits. 



EVENTS SINCE 1860 177 

These facts, together with a yearly figure for Brad- 
street's index of commodity prices amounting to 
about 9.00, showed clearly that the country's 
money market was strained and unsound. 

Investment conditions reflected this unsatis- 
factory state of affairs most faithfully. Transac- 
tions on the New York Exchange declined to less 
than 165,000,000 shares, the lowest figure since 
1903; but new securities listed, amounted to 
$2,047,664,045, a considerable amount of which 
was due to the abolishment of the unlisted section 
of the Exchange. The ten stocks dropped from 
179 to 147. Although gross earnings of the rail- 
roads showed an increase over last year, the un- 
favorable increase in the ratio of operating expenses 
caused net earnings to show a marked and most 
unsatisfactory decline. Optimism based on the 
crop reports was well justified by the actual re- 
turns. Wheat production declined somewhat, but 
cotton was better, and corn yielded a bumper crop 
of more than 3,000,000,000 bushels. The prices of 
all three, however, declined respectively to $.95 
a bushel, $.137 a pound and $.57 a bushel. Un- 
certainty was the keynote of the year. "Insur- 
gency," Democratic success at the polls, and 
governmental delay in trust and railroad rate 
questions, had their share in causing hesitation. 
1911. 

Mercantile conditions continued to evince the 
decline during this year, and others than students 
of fundamental conditions at last were willing to 
acknowledge that the outlook was not as good as 
it might be. 



178 BUSINESS BAROMETERS 

Total bank clearings declined during the year 
about 3%, making the total decline from the high 
point of 1909 about 4%. Under conditions of 
normal growth along the line X-Y, clearings for the 
country, excluding New York, should have been 
increased greatly instead of remaining so nearly 
on a level. There was a larger number of failures, 
and liabilities were about five per cent lighter. A 
marked decline of more than 15% was shown in 
immigration reports, bringing us to one of the 
lowest levels in ten years. Average per mile 
earnings of the railroads reporting to the Interstate 
Commerce Commission declined, but both gross 
and net earnings of the ten roads on the Desk Sheet 
increased, as compared with 1910. Commodity 
prices declined, and this slackening was followed 
by an advance in food-stuffs, which checked the 
decline of Bradstreet's Index of Commodity Prices. 

Owing to an inactive stock market and declining 
business, money rates were much easier, but 
students of fundamental conditions did not feel 
that the loans of the banks had been sufficiently 
liquidated to render the situation satisfactory. 
There was a constantly increasing amount of 
money in circulation, but the estimated average 
per capita, $34.41, did not increase as fast. In 
January and March the National Banks reported 
a percentage of loans to deposits, with the exception 
of the call of September 1, 1910, higher than at any 
time since 1908. The net deposits also increased, 
the figure $6,689,018,000 on June 7, being the 
highest on record, with the per cent of reserve at 



EVENTS SINCE 1860 179 

22.10% compared with a previous high of 23.94% 
in 1908. The ratio of reserve to deposits decreased 
to 21.05% on December 5, the lowest point since 
March 22, 1907. Imports declined, and exports 
of general merchandise increased about 15%. This 
increase was due to large exports of food-stuffs, 
both raw and manufactured, and also to a great 
increase in exports of general manufactures. 

Imports declined somewhat, but were not far 
below 1910, which year made the highest record 
in the history of the import trade. Gold exports 
decreased 37%. Gold imports remained about 
the same as in 1910, and therefore the resulting 
balance in favor of the United States was very 
satisfactory. 

Investment conditions during 1911 were very 
unsatisfactory. Dullness was at times exceedingly 
marked. On the New York Stock Exchange the 
number of shares traded was very small, 
127,207,058, compared with 164,150,061 in 1910. 
Bond sales increased, and fewer new securities 
were listed, but the amount of actual issues was 
nearly 15% greater. Gold production continued 
to increase. A severe drought reduced the yield 
in some of the crops; wheat, oats, hay, and potatoes 
were below the average; corn was only fair, while 
the largest acreage of cotton ever known produced 
over 14,000,000 bales. Investment conditions 
were adversely affected by the Supreme Court 
decisions and reorganization of large corporations 
under the Sherman Law, the consequent discussion 
and uncertainty reacting unfavorably on the 
market and business in general. 



CHAPTER VI 

SUBJECTS RELATING ESPECIALLY TO MERCAN- 
TILE CONDITIONS 

(For figures for years later than those given, see the large sheet in the 
Addenda at the end of this book.) 

WHEN interpreting the twenty-five subjects 
treated in this and the following two 
chapters one must remember that it 
is first necessary to decide in which of the four 
periods the country is; whether in a period of de- 
pression, a period of improvement, a period of pros- 
perity, or a period of decline. This is due to the 
fact that the same changes in the figures of a given 
subject signifies different results under different 
periods; for example, during a period of depression, 
an increase of Bank Clearings is a favorable sign, 
but during a period of prosperity a great increase 
is a dangerous sign. This problem, however, is 
readily solved by reference to the Composite Plot. 
After deciding in what period the country is, each 
set of subjects must be interpreted in accordance 
with certain rules. In other words, with a given 
subject a decrease signifies one thing, an increase 
signifies another, while no change signifies a third. 
Therefore, the figures on each subject should be ex- 
amined independently to ascertain whether the 
figures show a decrease, an increase, or no change. 
The new figure, whatever it is, will then be in- 
terpreted according as it shows "more satisfactory 



MERCANTILE CONDITIONS 181 

conditions," "less satisfactory conditions," or "un- 
certainty." After reaching this conclusion, relative 
to what the figures on the subject under consider- 
ation signify, a note should be made of the result. 

Each subject is treated in this manner and a 
conclusion reached. All of these conclusions are 
then summarized and count is taken of how many 
subjects signify an improvement, how many signify 
a decline and how many signify something else. 
All of these are then averaged, though a greater 
"weight" may be given to one subject than to an- 
other; and a conclusion reached as to the duration of 
the present period and the nature of the next change. 

In short, the study of Fundamental Statistics 
consists simply of obtaining the latest figures on 
each subject, noting their trend, comparing both 
the figures and the trend with normal figures and 
normal trends for said subject, and lastly deducing 
one final conclusion as to whether the figures and 
the general trend of the figures on all the subjects, 
taken together, are becoming more normal or less 
normal, considering the areas of the Composite 
Plot. 

Remembering that although theoretically the 
proper method is to consider each subject inde- 
pendently, yet the only safe method is to consider 
what they, as a whole, indicate. This can be best 
seen by a study of the Composite Plot. Therefore, 
although the directions given in these three chap- 
ters are very valuable for use as a check upon what 
the Composite Plot indicates, yet no independent 
subject should be allowed to overshadow what the 



182 BUSINESS BAROMETERS 

Composite Plot indicates, viz.: (1), the Composite 
Plot always shows at a glance in what minor period 
we are and what period may next be expected; 
and, (2), how long it will probably be before 
this next period of depression or prosperity will be 
upon us. 

Therefore, in all cases, the "area consumed," as 
shown by the Composite Plot, must also be care- 
fully considered. 

Let us now turn directly to a study of such sub- 
jects as relate especially to mercantile conditions. 

WEALTH, BUILDING AND REAL ESTATE 
OPERATIONS 

"Wealth," according to Theodore E. Burton, 
comprises "all things which are alike useful, limited 
in supply, and transferable. All wealth is produced 
from or created by, land, labor, or capital. Land 
includes every form of nature in earth, seas, or air, 
together with the natural forces which may be set 
at work. It is the source of our so-called 'raw ma- 
terials.' Labor includes physical strength and ex- 
ertion, and the mental qualities which furnish them 
with method and ingenuity." 

"Capital, technically defined, is wealth withheld 
from immediate consumption for the purpose of 
producing wealth in the future. It includes food, 
clothing and fuel for support of those engaged in 
production of wealth, necessary seed for planting, 
raw materials for the finished products of manu- 
facturers or, if we look at the subject from the 
standpoint of the employer or capitalist, money for 
wages and the purchase of supplies. These may 



NEW BUILDING 183 

be included in the term circulating capital. There 
is also fixed capital, which includes tools, machines, 
factories, buildings occupied or used by those en- 
gaged in productive employment, improvements 
upon land, likewise ships and railways with all their 
equipment. Nations are rich or poor not in pro- 
portion to the amount of land or natural resources 
which they have, but in accordance as they have an 
abundance or lack of capital." 

The above describes what is technically known as 
"wealth." A concrete example of what constitutes 
wealth may be found in the following tables. The 
figures are made up by the Bureau of the Census, 
Washington, and as reported for the census years, 
are carefully compiled records of actual values as 
appraised under the general terms, real and personal 
property. The figures for all years between the 
census years are estimates, and show proportional 
changes, based somewhat upon partial returns in 
some of the items included. The tables show ex- 
actly the forms of wealth comprising the total 
$107,104,211,917, according to the estimate of 
1904-5. 



ESTIMATED WEALTH OF THE UNITED 
STATES. 

Latest Estimate 

1904-5 1900 

Real property taxed $55,510,247,564 $46,324,839,234 

Real property exempt .. 6,831,244,570 6,212,788,930 

Live stock 4,073,791,736 3,306,473,278 

Farm implements and 

machinery 844,989,863 749,775,970 



184 BUSINESS BAROMETERS 

Gold and silver coin and 

bullion $1,998,603,303 $1,677,379,825 

Manufacturing machin- 
ery, tools, etc 3,297,754,180 2,541,046,639 

Railroads and their 

equipments 11,244,752,000 9,035,732,000 

(a) Street railways, etc. . 4,840,546,909 3,495,228,359 

(b) All other property . . . 18,462,281,792 15,174,042,540 

Grand total 107,104,211,917 88,517,306,775 

a. Street railways, etc. (itemized) 

Street railways $2,219,966,000 . SI, 576, 197, 160 

Telegraph systems 227,400,000 211,650,000 

Telephone systems 585,840,000 400,324.000 

Pullman and private cars 123,000,000 98,836,600 

Shipping and canals 846,489,804 537,849,478 

Privately owned water works . 275,000,000 267,752,468 
Privately owned electric light 

and power stations 562,851,105 402,618,653 

Total 4,840,546,909 3,495,228,359 

b. All other property (itemized) 

Agricultural products SI, 899, 379, 652 Sl.455,069,323 

Manufacturing products 7,409,291,668 6,087,151,108 

Imported merchandise 495,543,685 424,970,592 

Mining products 408,066,787 326,851,517 

Clothing and personal orna- 
ments 2,500,000,000 2,000,000,000 

Furniture, carriages, etc 5,750,000,000 4,880,000.000 

Total 18,462,281,792 15,174,042,540 

NOTE: — C. A. Conant, who was authorized by the Census to estimate 
outstanding securities in the United States, gave in the Atlantic Monthly 
for January, 1909 a preliminary estimate of $34,514,351,382 or $414.54 per 
capita, of which $10,120,418,699 is held by holding companies. He figured 
the outstanding securities in Great Britain as $26,400,000,000 or $616.97 
per capita; in France $19,500,000,000 or S500.94 per capita; Germany 
810,000,000,000 or S177.41 per capita; and in Holland S2, 200. 000, 000 or 
$405.08 per capita. For fourteen countries the aggregate is Sill, 077, 764,- 
333 or S196.17 per capita. 

Though the census figures are the only statistics 
which give the actual value of property in the 
country, since a complete statement is made only 
once in ten years, the needs of fundamental sta- 
tistics lead to the adoption of certain other reports 
which may be expected to serve as barometers of 
the conditions termed wealth by our first propo- 
sition. 

Building statistics, including railroad and mu- 
nicipal construction, give us the most interesting 



NEW BUILDING 185 

figures on this subject. Because a new house costs 
$10,000, all land on the same street improves and 
the valuation of the whole city is some thousands 
of dollars greater at the next census. A factory 
erected on the same street might reduce the real 
estate value as residence property, but might so 
benefit the city as a whole as to increase greatly 
its entire wealth. 

The difficulty of obtaining accurate reports of 
building has been an obstacle heretofore in the way 
of systematic study of the subject. The laws of 
cities and states are so different, that the returns 
from building permits alone are not reliable as a 
basis. But from the field of the contractor another 
set of figures is to be had. The best of these have 
been developed by the F. W. Dodge Co., of Boston, 
and the "Construction News" of Chicago. The 
business of these firms is to make a thorough can- 
vass of the principal fields of constructive activity 
in order to furnish accurate information of business 
openings for contractors and supply firms of all 
kinds. Reports gathered by this very thorough 
system have been published from time to time for 
many years; but have only recently been segregated 
and tabulated. This has been done by my office, 
and the figures are now ready for the use of students 
of fundamental statistics. These reports cover the 
new work, both in private and municipal building 
and railroad construction. The values given are 
conservative and the result of careful inquiry by 
trained observers. 



186 BUSINESS BAROMETERS 

Fire losses, as reported monthly, include all fires, 
and show the total destruction of timber, rolling 
stock of railroads, wharfage and shipping, as well as 
buildings of all kinds. As in the case of construc- 
tion or building statistics, the amounts given in 
these fire loss tables cannot be compared directly 
with the census figures on wealth. Sometimes the 
insurance loss is given, sometimes the assessed val- 
uation, sometimes an estimate, as in buildings and 
contents under appraisal. The direct loss by for- 
est fires is hard to determine exactly, while the in- 
direct losses, so well known to the students of for- 
estry, cannot be calculated for use at frequent 
intervals. The monthly record, however, is a val- 
uable indicator of conditions likely to contribute 
to the improvement or decline of business and 
should, for that reason, be watched. Conditions 
of poverty following fires, or general improve- 
ment as a result of new construction, are both 
necessary and valuable barometers of business 
and show where to increase or decrease invest- 
ment in land, labor and capital. 

Another factor of importance, and bearing a re- 
lation to the second group of subjects we are con- 
sidering, is the real estate business. To under- 
stand rightly the financial condition of this country, 
we should know the history of real estate booms 
and watch for increased rents either of land or 
buildings. During the hard times of the winter 
following the crisis of 1907, many of the leading 
manufacturers reduced their rents fifty per cent, 
some more and some less. By such means, they 



NEW BUILDING 187 

hoped to keep their employees on hand for renewed 
production. Such action was an attempt to meet 
the wage-earner half way and is directly opposed to 
the spirit of that real estate boom, the chief phase of 
which is an arbitrary raising of rents for tenements 
of all kinds. Such raises are usually seen in times 
of improvement and especially towards the cul- 
mination of a period of prosperity when rising 
wage-scales attract the attention of the house owner 
who raises his rents, and reaps his harvest, at the 
same time when commodity prices and security 
markets are rising. A study of the statistics will 
show that real estate values are very good business 
barometers. New land developed, irrigation sys- 
tems introduced, and a variety of similar factors 
may seem to be the causes of booms here and there ; 
but none of these enterprises can be carried on 
without the active investment of capital under 
sound fundamental conditions. 

So, for the purposes of fundamental statistics, 
beside the official figures on wealth, there should 
be included these three subjects: (1) building 
construction, (2) fire losses and (3) real estate val- 
ues. These subjects give us a gauge of conditions 
more frequently than once in ten years. 

As the business man is much more interested in 
the relation of wealth to prosperity than in any 
definitions, it is interesting to note history and 
ascertain how the wealth of the country has affected 
conditions in the past. Let us, for example, study 
the relation of "Miles of New Railroad" to general 
conditions, using these construction figures as 



188 BUSINESS BAROMETERS 

illustrative of "New Building."* The first great 
crisis which this country experienced was in 1837; 
it was preceded by six years of great activity. The 
railroad mileage of the country had grown from 23 
miles in 1830 to 1500 miles in 1837. Simultane- 
ously with this growth in railroad mileage, new 
towns had been founded, new factories had been 
opened, desert lands had become taxable, farm 
property and the wealth of the country had rapidly 
increased. If the reader will turn to the records of 
this time, he will find that there was a greater in- 
crease of wealth between 1832 and 1837 than during 
any previous ten years of our history. A great 
number and variety of new enterprises were started, 
the bank deposits were large and there was great 
interest in trading, shipping, manufacturing and 
real estate. In fact, this great increase in real es- 
tate speculation resulted in a similar increase in the 
assessed valuation of both city and country prop- 
erty. 

The second great crisis came in 1857, and was 
likewise preceded by a period of great increase 
in new construction. Immediately following the 
panic of 1837 there was a period of great depression 
and, although conditions improved in 1844 and 
1845, there was no great advance until the discovery 
of gold in 1849. By 1852, California was actually 
sending millions of dollars worth of gold to New 
York. Shipping received a tremendous impetus 
both on account of the trade with California and 



♦This is done because it has been impossible to obtain good records 
strictly for "New Building" previous to 1909. 



NEW BUILDING 189 

on account of the Crimean War in 1854 and 1855. 
There was also a great increase in railroad mileage, 
which advanced from only 5600 miles in 1847 to 
24,500 miles in 1857. In other words, in 1830 there 
were but 23 miles of railroad and in 1837, the year of 
the panic, this had been increased to 1500 miles. 
During the ten years between 1837 and 1847, less 
than 3400 miles of new track were constructed, yet 
in the ten years from 1847 to 1857 about 20,000 
miles were constructed. When studying such 
figures it appears very easy to have prophesied a 
panic for 1857. With the building of these 20,000 
miles, thousands of new towns were settled, millions 
of acres of hitherto untaxed land became taxable 
as farm land, and a vast number of manufacturing 
and other enterprises were started. The result 
was another great increase in wealth equalled only 
by the increase which preceded the panic of 1837. 
As a still further result, came the panic of 1857, 
causing bankruptcies, suicides, and widespread des- 
titution. 

The third great crisis came in 1873. Like its 
predecessors, it had many causes among which, 
beyond a doubt, was the great increase in new 
building construction and new miles of railroad. 
The Civil War had been accompanied by great 
destruction of property and a consequent reduction 
in wealth. This was due partly to deterioration 
of values and the depreciation of the currency; but 
largely to the fact that the attention of the people 
had been turned away from productive industry. 
Ploughshares had been turned into swords with 



190 BUSINESS BAROMETERS 

the accompanying decrease in production. When 
the Civil War was over, both the South and the 
North again gave their attention to agriculture, 
manufacturing and commerce with the result of 
an unprecedented rebound. During the early six- 
ties, taxable property decreased ; during the early 
seventies it rapidly increased. The gain in wealth 
between 1868 and 1873 was greater than it had 
ever been in the history of the country. 

If later panics (that is, the panics of 1884, 1893, 
1903, and 1907) are studied, the same law will be 
found to hold true. Furthermore, by inverse 
reasoning from these same figures it will be found 
that years of prosperity may likewise be antici- 
pated. 

We can therefore confidently affirm that a period 
of abnormal increase in new building is almost sure 
to be followed by a "period of depression." 

These illustrations are sufficient to show how 
deeply the investor's and merchant's interests are 
concerned in this subject. Whether a small store- 
keeper, a retailer, a manufacturer or a great mer- 
chant, his welfare is most intimately related to the 
total wealth of the country. Many lessons for all 
classes of people may be drawn from this fact. 

The following are certain conclusions relative to 
"Building Operations." 
1. During a Period of Business Depression. 

(a) An increase forecasts better conditions. 

(b) A decrease forecasts continued depression. 

(c) No change signifies conditions to be sta- 
tionary. 



BANK CLEARINGS 191 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase forecasts a period of pros- 
perity. 

(b) A decrease forecasts a set-back. 

(c) No change suggests caution. 

3. During a Period of Prosperity. 

(a) A great increase usually calls for caution. 

(b) A decrease may tend to lengthen the pe- 
riod of prosperity. 

(c) No change signifies conditions to be sta- 
tionary. 

4. During a Period of Decline Following a Period 

of Prosperity. 

(a) An increase is indicative of further trouble. 

(b) A decrease is natural under these condi- 
tions. 

(c) No change suggests caution. 

BANK CLEARINGS 

Bank clearings are divided into two main 
classes : 

(a) Total Bank Clearings of the United 
States. 

(b) Bank Clearings of the United States with 
the exception of New York City. 

In every large city, and many small ones having 
more than two banks, there is an institution known 
as a "clearing house." Each day at some given 
hour the representatives of all the banks in the city 
or town meet at one of the banks to exchange checks 
drawn on one another and such a bank thus serves 



192 BUSINESS BAROMETERS 

as a temporary "clearing house." To illustrate: 
If customers of the Gloucester National Bank de- 
posit during the day $20,000 in checks drawn 
on the Gloucester Safe Deposit and Trust Company 
and customers of the Trust Company deposit checks 
to the amount of $15,000 drawn on the Gloucester 
National Bank, instead of the Gloucester National 
sending a messenger to collect the $20,000 from the 
Trust Company and the Trust Company sending a 
messenger to collect the $15,000 from the Glouces- 
ter National, representatives of both banks meet 
and exchange checks and the Trust Company gives 
the Gloucester National a check for $5,000 to bal- 
ance the account. This process of settlement is not 
of great importance in a city having only two or 
three banks, but the average importance increases 
rapidly as the number of banks increases. In 
large cities such as New York, Chicago, Philadelphia 
and Boston, the "clearing house" occupies a sepa- 
rate building and has regularly salaried employees. 
The largest clearing house in this country is in 
New York City. It was established in October, 
1858, and passes annually an average of about 
$100,000,000,000 in the form of checks. In all there 
are about 140 clearing houses or associations in the 
United States. In other words, there are about 
140 cities of sufficient importance and with a suffi- 
ciently large number of banks to have clearing 
houses and to make public their "Clearings."* 

*For further particulars as to the details of clearings and the business 
of clearing houses refer to Jas. G. Cannon's most complete book on the 
subject, entitled "Clearing Houses," and also to "The Principles of Money 
and Banking" by Conant. For a very simple and condensed state- 
ment, refer to pages 80-86, inclusive, of "Money and Investments" by 
Montgomery Rollins. 



BANK CLEARINGS 193 

Clearings serve as a very good barometer of 
present business conditions and the reason for this 
is as follows: Out of the 20,000 or more banks in 
the United States, about one-third are connected 
with one of the above-mentioned 140 clearing 
houses. This means that practically all of the 
checks handled by these thousands of banks, pass 
through some clearing house. Therefore by watch- 
ing the record of the checks "cleared," we obtain 
an idea of the total business transacted by about 
7,000 banks, which are the largest of the 20,000 
and in fact control about nine-tenths of the banking 
of the United States. 

As to-day practically all payments are made by 
check and all business is carried on through the 
banks, the volume of money handled by the banks 
by check increases or decreases in constant ratio 
with the general volume of business of the country, 
provided that the prices of the commodities and securi- 
ties traded in, remain constant. Therefore, as the 
banks pass their business through the clearing 
houses, a report on bank clearings is a very good 
barometer of present business conditions. 

Some people make the mistake of assuming that 
by studying clearing house statistics solely one can 
easily forecast business conditions. A study of these 
statistics is an aid in forecasting conditions, both 
along lines above mentioned and in connection with 
Prof. Irving Fisher's "Equation of Exchange"; 
but taken by themselves they are of little value. 
On the other hand, some critics do not care "to 
know about present conditions, but desire only to 



194 BUSINESS BAROMETERS 

forecast future conditions." This point of view 
is also illogical, as a knowledge of present con- 
ditions is a necessary step toward forecasting future 
conditions. 

Were it not for the systematic reports received on 
bank clearings, our Composite Plot would be much 
less valuable. By a study of these clearings, as 
they are reported each week, one is in immediate 
touch with existing conditions throughout the coun- 
try and is also able to study the "velocity of 
circulation," which, as it increases, is a form of 
credit inflation. In making use of these statistics 
two methods are used: 

1. The bank clearings are plotted for each week 
for a number of past years with a horizontal scale 
for weeks and a vertical scale of billions. With one 
half inch to a week this makes a plot about thirty 
inches long. It is customary to have each year 
under the preceding year, a thing easily done, as 
each plot is of the same length, although the angle 
of fluctuations is not constant. This gives compar- 
ative plots for several complete years, directly 
under which appears a plot for the present year up 
to the receipt of the last report on bank clearings. 
This not only gives the merchant a bird's-eye view 
of the situation for the present year, but also an idea 
of what may be expected at different periods during 
the year. During some periods of the year poor 
figures on bank clearings are not, in reality, as un- 
satisfactory as if they had occurred at other seasons. 
The principal use of this plot, however, is to study 
the fluctuations of the last portion of the plotted 



BANK CLEARINGS 195 

line for the current year. In other words, the 
business man notes whether the variations of the 
last few months plotted for the current year is 
upward or downward, and also how said variations 
compare with similar months of previous years, or 
in other words, with normal figures. If the plots 
for these previous years can be combined into one 
plot for an assumed normal year for purposes of 
comparison, the work is greatly simplified. This 
may seem to be a simple method of procedure, but 
when fully comprehended and carefully studied, 
it will be found to furnish not only a bird's-eye view 
of present conditions, but, in conjunction with a 
study of other subjects, the best possible idea of 
whether general business is becoming better, worse, 
or simply holding its own. 

2. The other method is more mathematical and 
more readily operated. Instead of plotting the 
figures for a series of years, merchants simply 
tabulate the totals as follows: 

Bank Clearings of U. S. Bank Clearings of U. S. 

Excluding N. Y. 



Year 


Total 


Year 


Total 


1883 


$51,699,823,752 


1883 


$14,265,522,880 


1884 


44,165,125,355 


1884 


13,179,255,183 


1885 


41,439,303,599 


1885 


13,287,102,263 


1886 


49,247,681,466 


1886 


15,570,851,854 


1887 


51,091,236,324 


1887 


17,616,680,056 


1888 


49,484,584,175 


1888 


18,384,046,654 


1889 


56,110,250,455 


1889 


20,215,145,550 


1890 


60,546,563,997 


1890 


23,087,956,388 


1891 


56,657,179,617 


1891 


22,907,857,405 



196 BUSINESS BAROMETERS 



1892 


$61,919,125,622 


1892 


$25,256,657,420 


1893 


54,143,527,180 


1893 


22,822,489,378 


1894 


45,460,058,609 


1894 


21,072,251,587 


1895 


53,180,700,764 


1895 


23,338,903,840 


1896 


51,246,323,830 


1896 


22,375,548,783 


1897 


57,229,070,956 


1897 


23,802,043,485 


1898 


68,826,557,324 


1898 


26,854,774,887 


1899 


94,047,400,783 


1899 


33,258,608,882 


1900 


86,070,549,683 


1900 


33,436,347,818 


1901 


118,410,015,182 


1901 


38,982,329,340 


1902 


118,023,298,740 


1902 


41,695,109,575 


1903 


109,208,987,769 


1903 


43,238,849,809 


1904 


112,621,012,711 


1904 


43,971,594,038 


1905 


143,909,448,441 


1905 


50,087,388,239 


1906 


160,003,265,739 


1906 


55,327,436,983 


1907 


145,175,733,493 


1907 


57,993,565,112 


1908 


132,408,849,136 


1908 


53,132,968,880 


1909 


165,838,191,330 


1909 


62,249,402,999 


1910 


164,097,058,778 


1910 


66,822,558,695 


1911 


160,000,003,510 


1911 


67,627,190,774 



Column 1 is for the bank clearings of the entire 
United States, and column 2 is for the United States 
with the exception of New York City. {In practice 
these figures are subdivided into months and only 
the past eight or ten years are studied.) As a sec- 
ond step, the merchant notes from the monthly 
tables the actual figures received for the current 
year to date and estimates the probable clearings 
for the remainder of the year. This may be illus- 
trated somewhat as follows: The merchant notes 
what proportion the clearings for January, Feb- 
ruary and March have heretofore borne to the 
clearings of the entire country. (A novice might 



BANK CLEARINGS 197 

think it was simply necessary to multiply the clear- 
ings of three months by four in order to have an es- 
timate for the entire year, but such a method is not 
correct, since it does not provide for the seasonable 
changes before alluded to.) By making a study 
of the relation that these three months bear to the 
entire year for several years back, it is possible to 
make a very good estimate for the entire current 
year even if only three months are reported. Hav- 
ing made this estimate, one compares it with the 
total figures for previous years and forms an opinion 
as to the probable business conditions for the cur- 
rent year. If the study is dropped at this point 
these figures would be of no value, but the merchant 
revises this estimate each month, as new figures 
are received, and also notices whether the revised 
figures are increasing or decreasing. In other 
words, by this second method, the one universally 
recommended, the merchant studies the statistics 
to note whether each succeeding estimate is an 
increase or a decrease over the previous estimate. 
If the new estimate is an increase, this shows that 
business conditions are improving as marked by 
an upward line on the plot. If the new estimate 
is a decrease, it shows that business is decreasing, 
as marked by a downward line on the plot. If 
the new estimate is practically the same as the last 
one, this indicates that there may be no change 
either for the better or for the worse, as marked 
by a horizontal line on the plot. 

The remaining point to be considered on the sub- 
ject of bank clearings is the reason for separating the 



198 BUSINESS BAROMETERS 

subject into the two main classes as per the preced- 
ing tables. The reason for this subdivision is as fol- 
lows: The clearings of New York alone are more 
than one-half of those of the entire country. If 
these clearings were simply a result of commercial 
business transactions, that is, the transactions of 
merchants, manufacturers and business men, there 
would be no reason why the New York Clearings 
should not always be included with the clearings 
of other cities. The facts of the case, however, 
show that an exceedingly large percentage of New 
York clearings is affected by the transactions of 
bankers or is intimately related to the stock 
exchange transactions. This may be clearly shown 
by plotting two lines, one for the transactions of 
the New York Stock Exchange and the other for the 
bank clearings of New York. These lines, although 
very "zig-zag," are almost parallel to each other, 
and when one rises the other follows, and vice 
versa. For this reason during dull times on the 
stock exchange, bank clearings of the United 
States including New York may show a decrease, 
even though general business throughout the coun- 
try is increasing, while during a very active period 
on the New York Stock Exchange, the bank 
clearings of the entire United States including 
New York, may show an increase, even though 
general business throughout the country is de- 
creasing. 

For this reason, in order to judge correctly the 
general business of merchants and manufacturers 
throughout the country, it is best to consider the 
bank clearings of the United States with the excep- 



BANK CLEARINGS 199 

Hon of New York City. If the figures for the United 
States with the exception of New York City have been 
properly studied and a conclusion drawn, it is also 
well then to note the figures for the entire country, 
including New York City. If the figures for New 
York City confirm the conclusion arrived at when 
not including New York City, then the result may 
be considered absolutely correct. The most suc- 
cessful merchants tabulate, each month, the sum of 
the figures for New York and those excluding New 
York, after first multiplying the latter by 4 or 5, as 
suggested by Prof. Irving Fisher of Yale University. 
The following conclusions are suggested relative 
to "Bank Clearings." (Also see note on page 216.) 

1. During a Period of Business Depression. 

(a) An increase signifies that trade is im- 
proving. 

(b) A decrease signifies that trade conditions 
are growing worse. 

(c) No change signifies that trade conditions 
are remaining fixed. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase signifies that trade is con- 
tinuing to improve. 

(b) A decrease signifies that the improve- 
ment has temporarily been checked. 

(c) No change shows that progress is very slow. 

3. During a Period of Prosperity. 

(a) An increase shows that trade conditions 
are very prosperous, although too great an increase 
under such conditions often forecasts trouble. 



200 BUSINESS BAROMETERS 

(b) A decrease shows that a change is taking 
place and business is decreasing. 

(c) No change at this point often is a sign 
that a change is about to take place. 

4. During a Period of Decline Following a Period 
of Prosperity. 

(a) An increase signifies a temporary check 
in the decline. 

(b) A decrease is the natural movement and 
signifies no improvement. 

(c) No change shows uncertainty or possibly 
serves to delay the coming panic. 

BUSINESS FAILURES 
Every great crisis has been made known to the 
public by one or more large failures, sometimes 
accompanied by the exposure of dishonest methods, 
sometimes by political or national calamity; more 
often by the failure of some bank or number of 
banks in endeavoring to finance industries or new 
corporate undertakings. So failures, — that is 
large, single failures, — stand as signals of sharp 
crises, and the beginning of depression. They may 
be followed by other large failures and many small 
ones, so quickly that the total both in the number 
of failures and in liabilities for the panic year is 
swelled, as in 1893, far above the limits of other 
years just preceding and following it; or the failure 
record may move slowly and may require more 
than a year for any great change. Failure statis- 
tics, therefore, are of use principally in determining 
the probable length of a period of depression as 
shown by the following figures. From these it 



FAILURES 201 

will be seen that after a crisis in no case has pros- 
perity returned until failure statistics have again 
become normal. 

FAILURE STATISTICS FOR THE UNITED STATES. 

Table I. 

Compiled from figures furnished by R. G. Dun & Co. 



Year 


No. of 


Liabilities 


Year 


No. of 


Liabilities 




Failures 


in Millions 




Failures 


in Millions 


1857 


4,932 


291.8 


1885 


10,637 


124.2 


1858 


4,225 


95.7 


1886 


9,834 


114.6 


1859 


3,913 


64.4 


1887 


9,634 


167.6 


1860 


3,676 


79.8 


1888 


10,679 


123.8 


1861 


6,993 


207.2 


1889 


10,882 


148.8 


1862 


1,652 


23.0 


1890 


10,907 


189.9 


1863 


495 


7.9 


1891 


12,273 


189.9 


1864 


520 


8.6 


1892 


10,344 


114.0 


1865 


530 


17.6 


1893 


15,242 


346.8 


1866 


1,505 


53.8 


1894 


13,885 


172.9 


1867 


2,780 


96.7 


1895 


13,197 


173.2 


1868 


2,608 


63.7 


1896 


15,088 


226.1 


1869 


2,799 


75.0 


1897 


13,351 


154.3 


1870 


3,546 


88.2 


1898 


12,186 


130.7 


1871 


2,915 


85.2 


1899 


9,337 


90.9 


1872 


4,069 


121.1 


1900 


10,774 


138.5 


1873 


5,183 


228.5 


1901 


11,002 


113.1 


1874 


5,830 


155.2 


1902 


11,615 


117.5 


1875 


7,740 


201.0 


1903 


12,069 


155.4 


1876 


9,092 


191.1 


1904 


12,199 


144.2 


1877 


8,872 


190.7 


1905 


11,520 


102.7 


1878 


10,478 


234.4 


1906 


10,680 


119.2 


1879 


6,658 


98.1 


1907 


11,725 


197.4 


1880 


4,735 


65.8 


1908 


15,690 


222.3 


1881 


5,582 


81.2 


1909 


12,924 


154.6 


1882 


6,738 


101.5 


1910 


12,652 


201.7 


1883 


9,184 


172.9 


1911 


13,441 


191.1 


1884 


10,968 


226.3 









For example, note in the above table the year 
1857, both in number and liabilities. Note that 
the crisis is indicated in the amount of liabilities, 
for while in 1858 the number of failures is still 
large, there is a reduction of liabilities amounting 
to more than 32.8 per cent. The next three years 
show depression by a relatively large number of 



202 BUSINESS BAROMETERS 

failures; but they are of lessening average amount 
of liabilities. That statistics of failures may indi- 
cate not only the length but the general character 
of a depression is proved particularly well from the 
course they take from the crisis year of 1873 to the 
height of the depression in 1878, and for a shorter 
period from 1893 to the culminating year of 1896. 
From the preceding table it is also evident that, while 
the average of liabilities per failure is less, the num- 
ber of failures is often larger toward the end of a 
depression than during the crisis year. 

FAILURE STATISTICS FOR THE UNITED STATES. 

Table II. 

Compiled by figures furnished by R. G. Dun & Co. 

Per 
Liabilities Liabilities cent 
Number of Average per capita per firm in fail- 



Year 


Failures 


Liabilities Liabilities of population business 


ing 


1875 


7,740 $201,060,333 


$25,960 


$4.55 


$339.78 


1.21 


1876 


9,092 


191,117,786 


21,020 


4.23 


305.15 


1.33 


1877 


8,872 


190,669,936 


21,491 


4.11 


302.60 


1.36 


1878 


10,478 


234,383,132 


22,369 


4.92 


259.49 


1.55 


1881 


5,582 


81,155,932 


14,530 


1.58 


108.65 


.71 


1882 


6,738 


101,547,564 


15,070 


1.93 


129.94 


.83 


1883 


9,184 


172,874,172 


18,823 


3.22 


210.23 


1.06 


1884 


10,968 


226,343,427 


20,632 


4.12 


261.94 


1.21 


1885 


10,637 


124,220,321 


11,678 


2.21 


137.28 


1.16 


1886 


9,834 


114,644,119 


11,651 


2.00 


124.60 


1.01 


1893 


15,042 


346,779,889 


22,751 


5.22 


290.65 


1.28 


1894 


13,885 


172,992,856 


12,458 


2.55 


155.25 


1.25 


1900 


10,774 


138,495,673 


12,854 


1.81 


119.63 


.92 


1901 


11,002 


113,092,376 


10,279 


1.45 


94.63 


.90 


1902 


11,615 


117,476,769 


10,114 


1.49 


94.85 


.93 


1903 


12,009 


155,444,185 


12,879 


1.94 


122.33 


1.12 


1904 


12,199 


144,202,311 


11,820 


1.76 


111.33 


.92 


1905 


11,520 


102,676,172 


8,193 


1.24 


78.75 


.85 


1906 


10,682 


119,201,515 


11,159 


1.41 


86.52 


.77 


1907 


11,725 


197,385,225 


16,834 


2.31 


139.75 


.82 


1908 


15,690 


222,315,684 


14,169 


2.55 


153.58 


1.08 


1909 


12,924 


154,603,465 


11,964 


1.74 


104.01 


.80 


1910 


12.652 


201,757,097 


15,947 


2.16 


133.16 


.80 


1911 


13,441 


191,061,665 


14,215 


2.02 


125.28 


.81 



FAILURES 203 

From this second table we have another view 
of the usefulness of failure statistics. While, as in 
Table I, the panic years are also plainly marked in 
Table II, by the percentage of failures to the total 
number of firms in business, Table II, in addition, 
shows something new relative to business condi- 
tions. 

Thus we find that up to 1878 the possibility 
of loss, that is the ratio of "liabilities" to the "num- 
ber of firms actually in business," was large or in- 
creasing from year to year, as was also the case 
from 1893 to 1896; while, on the other hand, the 
effects of the crisis of 1903 gave place very quickly 
to prosperous conditions, surpassing any known in 
thirty years previous. Furthermore, from the "per 
cent of failures" to the firms in business, we find 
that such figures as 11,002 for the failures in 1901, 
and 10,428 for 1878 mark two degrees of depres- 
sion more widely different than they would seem at 
first glance, and that the high number 11,725 of 
1907, or even 15,675 in 1908, indicate conditions 
much less severe than does the 7,740 of 1875. 

But as the study of the past, however interesting 
as pure history, is here to be regarded only as a 
means of understanding the significance of current 
changes, the points above mentioned are of value 
only in connection with the present day figures. 

The figures of the year 1907 are of special interest 
in this connection. This year is known as a "panic 
year," and the events of the months following 
October with its signal failures of certain New York 
banks have become a part of history closely joined 



204 BUSINESS BAROMETERS 

to present problems. While it is true that not one, 
but all factors, must be weighed together in estimat- 
ing the comparative position of 1907 among critical 
periods, merchants, bankers and investors find 
something of special value in statistics of failures. 
Statistics of the year are available in different 
forms. Divided into months, as is the customary 
way for merchants to compile them, there is mean- 
ing to be found in the year's record on lines similar 
to those used in the annual tables. The following 
figures for liabilities, expressed in millions, serve as 
illustrations: The "number" is omitted from these 
tables, as it is not customary for merchants to record 
said figures. If additional tables are desired, the 
"per cent to the firms in business" is recommended. 

Table III 
LIABILITIES EXPRESSED IN MILLIONS 



Month 


1902 


1903 


1904 


1905 


1906 


Jan. 


$14,312 


$12,978 


$18,483 


$10,417 


$11,952 


Feb. 


11.302 


10.907 


15.812 


9.780 


10.859 


Mar. 


8.117 


10.458 


13.770 


9.964 


10.949 


Apr. 


7.359 


11.811 


13.136 


8.056 


8.059 


May 


9.109 


12.314 


9.817 


8.907 


12.992 


June 


10.173 


8.326 


8.469 


8.777 


7.850 


July 


6.932 


17.751 


8.812 


6.148 


6.919 


Aug. 


8.068 


10.877 


10.491 


6.140 


8.821 


Sept. 


10.031 


7.229 


12.864 


8.039 


6.255 


Oct. 


10.851 


18.387 


10.525 


6.751 


10.553 


Nov. 


9.276 


16.422 


8.535 


8.866 


11.980 


Dec. 


11.941 


18.978 


13.481 


10.823 


12.006 


Month 


1907 


1908 


1909 


1910 


1911 


Jan. 


$13,628 


$27,099 


$14,008 


$32,015 


$24,090 


Feb. 


10.283 


27.064 


16.734 


27.435 


17.086 


Mar. 


8.163 


21.542 


13.718 


13.628 


18.474 


Apr. 


11.082 


20.316 


16.825 


17.752 


16.924 


May 


9.965 


13.643 


14.383 


9.590 


13.469 


June 


16.444 


14.708 


12.607 


11.817 


13.652 


July 


12.334 


14.222 


9.527 


13.790 


12.150 


Aug. 


15.197 


23.782 


9.620 


12.442 


11.116 



FAILURES 205 

Month 1907 1908 1909 1910 1911 

Sept. $18,935 $17,298 $8,446 $15,933 $11,900 

Oct. 27.444 15.898 12.529 18.977 19.270 

Nov. 17.637 12.599 9.812 11.324 15.266 

Dec. 36.296 14.139 14.625 18.038 17.659 

This table gives examples of what may serve as 
types of years. Thus 1903 had what was called 
"the rich man's panic," beginning with the stock 
market in the summer of that year and continuing 
into the next as shown very clearly by the table. 
The presence of business trouble is first indicated 
in July of 1903, when the amount of liabilities is 
very much increased; and this increase and this 
ratio remain practically unbroken for ten months. 
Normal years, also, such as 1905 and 1906, show 
heaviest liabilities between October and March, 
any increase between these points coming just be- 
fore or just after the fiscal year. 

While Table III is not in itself sufficient, the 
points just raised show the practical value of such 
figures. Even without knowing anything of the 
exact causes, a man with these figures at his hand 
could not have failed to think a little when, in the 
report for June, 1907, liabilities ran over 40% higher 
than in 1906 and nearly as much higher than 1905. 
As the new figures were received each month, and 
liabilities for the month of September reached an 
aggregate of nearly $19,000,000 compared with 
$8,039,947 for the same number of failures in Sep- 
tember, 1905, surely the change in ratio could have 
told something very definite as to the approach of 
bad times. Considering the liabilities in connec- 
tion with the per cent, of failures, we find the crisis 
month to have been November (average liabilities 



206 



BUSINESS BAROMETERS 



being $32,026.80 as compared with December, 
$30,760.06), for we maintain that the smaller "per 
cent." with heaviest liabilities, marks the financial 
climax, or the public break, or the great signal 
failure that openly declares trouble. By the quick- 
est, roughest estimates, the course of affairs can 
be very plainly traced by having these failure sta- 
tistics at hand. 

While to obtain accurate comparisons of the 
progress of the current year, as compared with 
others, more close calculating of the percentage in 
gain or loss per firm in business is always required, 
yet such work yields a good return. 

The following table (Bradstreet's) is also of in- 
terest in connection with analyses of failures. 



PERCENTAGE OF FAILURES AND LIABILITIES CLASSIFIED 
AS TO CAUSES— UNITED STATES PER CENT. 



Number 



Failure due to . . . 
Incompetence. . . . 

Inexperience 

Lack of capital . . 
Unwise credits . . . 
Failures of others 
Extravagance .... 

Neglect 

Competition 

Specific Conditions 

Speculation 

Fraud 



1907 

22 6 
4.9 

37.1 
2.3 
1.4 
.9 
2.5 
1.2 

16.3 
.7 

10.1 



1906 

22.3 
4.9 

35.9 
2.6 
2.0 
1.0 
2.2 
1.0 

17.3 
.8 

10.0 



1905 

24.4 
4.8 

33.4 
3.5 
2.2 
1.1 
2.9 
1.5 

16.3 

.7 

9.2 



1904 

23.1 
5.1 

32.2 
3.4 
2.5 
.8 
3.1 
1.3 

19.1 
.8 



Liabilities 
1907 1906 1905 1904 



3.2 

18.4 

3.1 

3.3 

.5 

.5 

.4 

51.7 

4.9 

5.1 



Failure due to 1910 

Incompetence 26.6 

Inexperience 4.4 

Lack of capital 33.9 



Unwise credits 1.7 

Failures of others 1.0 

Extravagance .7 

Neglect 2.5 

Competition 2.6 

Specific Conditions 14.4 

Speculation 1.0 

Fraud U-2 



Number 

1909 

24.2 

4.9 

34.5 

1.9 

1.2 

.9 

3.0 

2.5 

15.3 

.8 

10.8 



1908 

21.6 
4.0 

34.2 
2.0 
1.8 
1.0 
2.2 
1.8 

18.9 
1.0 

11.5 



15.5 
2.2 

30.9 
2.1 



1.5 

.4 

17.9 

3.6 

16.2 



14.1 
3.2 

31.8 
4.8 
8.2 
.7 
1.6 
10 
22.7 
5.3 
6.4 
Liabilities 
1910 1909 1908 



21.6 
2.1 

33.0 
4.2 
4.5 
.12 
1.1 
.9 

15.5 
7.7 
8.2 



21.3 

1.9 

27.9 

1 
3 



20.9 
2.6 

28.6 
3.2 
5.9 
2.3 
2.1 
1.4 

20.2 
4.4 
8.4 



16.0 
1.8 

27.2 
3.7 
5.0 



4.7 
6.9 



FAILURES 207 

For example, if 1907 showed, as is claimed, 37.1% 
of failures due to lack of capital, and if figures show 
that this cause is increasing year by year, it means 
clearly that the beginnings of new enterprises must 
be increasingly well supported, as it grows more 
difficult to add to inadequate capital when money 
rates are high or when competition makes it im- 
perative to expand. As inexperienced and com- 
paratively incompetent heads must continually 
join the business ranks, constant watching of the 
details of failure statistics is a practical necessity 
for them as well as for those whose money is in- 
vested in their interests. 

As Bradstreet's table excludes all losses except 
those strictly commercial, that is, those failures 
involving loss to creditors of individual firms or 
corporations engaged in legitimate mercantile oc- 
cupations, they cannot be compared, figure for 
figure, with the tables from other sources; but be- 
lieving that the figures due to failure in insurance, 
real estate, brokerage, etc., do have a distinct effect 
upon general business conditions, the analysis of 
these also should be a part of a study of the whole 
subject. 

Certain further facts should be mentioned here 
as bearing upon this question. One of these we 
have already suggested, namely: that as the country 
advances, statistics furnish evidence that the 
"commercial death rate" is growing less. The de- 
crease is as yet not one half of one per cent., but the 
rate is being reduced from 1 J% maximum to some- 
thing under 1%. Of course we should like to be- 



208 BUSINESS BAROMETERS 

lieve that this is a permanent improvement in busi- 
ness intelligence, but this point the future alone 
can prove. 

Another law recognized by merchants and al- 
ready suggested in this discussion, is that small 
firms do not feel the effect of a panic or depression 
until sometime after the effect is felt by the larger 
firms. For this and other reasons the study of 
this subject is especially valuable as a guide and 
protection to small merchants and storekeepers. 

In conclusion I will repeat that figures on 
business failures are of greatest value to all in de- 
termining what the length of the present "period" 
will be, and how soon one's own business and that 
of others, in which he has greater or less investments 
of capital, may be expected to show a change. 
When the flood begins to subside from its high 
water mark, a study of the rate at which it is 
subsiding, and a knowledge of the condition of each 
tributary stream assists very much in estimating 
the time when seed may be planted in the rich bot- 
tom land, now under water, or inversely as the case 
may be. We need not carry this figure of speech 
further in order to show that it contains the idea 
upon which merchants rate the study of Business 
Failures as of fundamental importance to their 
progress. For such study is but a part of a system 
by which they may know exactly the conditions 
upon which the next move should be based, and 
upon the result of which depends the subsequent 
course of the business life of each individual. 



FAILURES 209 

The following conclusions are suggested relative 
to "Business Failures." 

1. During a Period of Business Depression. 

(a) An increase signifies that the depression 
is not ended. 

(b) A decrease, after a large increase, signifies 
continued improvement. 

(c) No change signifies that caution is still 
necessary. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase in failures signifies that the 
improvement has been temporarily checked. 

(b) A continued decrease signifies continued 
improvement. 

(c) No change signifies that caution is still 
necessary. 

3. During a Period of Prosperity. 

(a) An increase in failures, especially of large 
concerns, signifies that no further improvement 
may be expected. 

(b) A great decrease signifies the need of 
caution. 

(c) No change signifies nothing of impor- 
tance. 

4. During a Period of Decline Following a Period 

of Prosperity. 

(a) An increase signifies no immediate im- 
provement. 

(b) A decrease signifies a temporary check 
in the decline or an improvement. 



.210 BUSINESS BAROMETERS 

(c) If there is no change the figure need not 
be considered. 

IMMIGRATION FIGURES AND LABOR CONDITIONS 

The general subject of labor conditions is of im- 
portance in diagnosing present business conditions 
and in forecasting changes which may be expected. 
But labor interests involve so many factors and in- 
clude so wide a field of investigation that, with 
the statistics at present available, it is absolutely 
impossible to compile figures that are sufficiently 
complete to tabulate for comparative purposes. It 
is hoped that some day either the labor unions or 
the government will find some practical means of 
keeping exact records of the number of men out 
of work, the rate of wages in effect and other items 
necessary for this purpose. 

At present the only complete figures are the cen- 
sus reports compiled once in ten years, and partial 
figures of some of the states reported only once in 
five years, but neither set of figures is of much use 
to the business man. There are also certain states 
which, in connection with the public employment 
bureaus, publish a classified list every week or 
month entitled "applicants desiring work;" but 
these lists are very incomplete and their records are 
of little more practical use than are the similar 
records kept by the leading charitable institutions. 
If every city or charitable institution did the work 
thoroughly and kept the dead matter weeded out, 
their records would be worth while, although they 
might cover but a small portion of the country. 



IMMIGRATION 211 

The same could be said of the labor union figures. 
These, if kept properly and accurately for a definite 
period and area, would be very valuable to manu- 
facturers and business men; but under present 
conditions they are at the most only suggestive, 
and not fit for precise analysis. Of all available 
statistics, those coming from the Commissioner of 
Labor may be most depended upon ; and though 
monthly reports of the same sort would be of dis- 
tinct value for the purposes of fundamental statis- 
tics, no such satisfactory figures can now be obtained. 

For either determining the present trend or fore- 
casting the approaching conditions, only figures 
which can be used for comparative purposes are of 
value. It is not necessary to have monthly figures 
covering a large section of the country, but they 
must cover the same section of the country at each 
statement. It makes little difference whether the 
reports are issued weekly or monthly; but it is of 
vital importance to systematic work that each re- 
port should cover the same period of time, — that is, 
either one week or one month regularly. Therefore 
while there are to-day many organizations prepar- 
ing figures which may, after a time, become of dis- 
tinct value for comparative purposes, none of them 
have yet reached this point, — with the possible 
exception of those from the Immigration Depart- 
ment of the United States. 

The immigration figures are issued monthly, each 
report covering the same ports, and these figures are 
carefully tabulated by all systematic manufacturers 
and merchants. 



212 BUSINESS BAROMETERS 

One of the valuable features of the present day 
method of studying fundamental statistics under 
twelve general headings, is that under each general 
heading or group, sub-topics can be added at any 
time, extending over an increasing amount of sub- 
ject-matter. For example, the subject of this 
group is "Labor Conditions" and at the present 
time the only figures tabulated are those on immi- 
gration; but as soon as suitable reports from the 
labor unions, charitable institutions, or other 
sources are obtainable, additional tables can be in- 
serted for these additional figures. All such sub- 
jects, accurately reported, will contribute to an ex- 
act understanding of the condition of labor in this 
country. In other words, in the preparation of 
the Composite Plot, the same amount of weight will 
continue to be given to "Labor Conditions" as 
formerly, but in arriving at decisions as to labor 
conditions more factors will be considered. 

As a barometer of labor conditions, immigration 
figures are extremely good. The steamship lines 
maintain a balance in the supply of labor between 
the United States and Europe. Labor, like water, 
seeks its own level, when both living expenses 
and wages are considered. Of course, if it costs 
five times as much to live in New York as in Italy, 
the Italian laborer will not come to this country for 
simply five times the wages that he receives at 
home, provided the demand for labor is the same in 
each country. Therefore, living expenses, as well 
as wages, must be considered. On the other hand, 
if the Italian can obtain wages in New York equal 



IMMIGRATION 213 

to ten times what he will receive in Italy, he will 
board a steamer for the United States, even with the 
expenses in New York five times as great as at 
home. Such high wages the Italian may always 
obtain in America in times of prosperity, and es- 
pecially in times just preceding the culmination of 
a period of prosperity. 

Conversely, when this period culminates, the 
demand for labor decreases, wages decrease and the 
Italian boards a steamer and returns to Italy. 
Therefore, as the Government keeps a careful record 
of when the immigrant enters the country and when 
he leaves, this report is an extremely good ba- 
rometer of unskilled labor conditions in the United 
States. Of course under almost any circumstances 
there are more people coming into a new country, 
like the United States, than there are going out, 
but the size of this excess number is very sensitive 
to changing conditions in the country as a whole. 

By studying and comparing the figures of the 
past twenty years, it will be seen that a crisis or de- 
pression in business conditions came soon after 
very high figures for immigration were reached. 
It is likewise true that there was an improvement 
in business conditions when, during a period of de- 
pression and very little immigration, there began 
to be an increase in immigration. In other words, 
very large numbers of alien arrivals during a period 
of prosperity may be counted as one of the factors 
signifying a culmination of such a period of pros- 
perity. Conversely, a very low number of alien 
arrivals during a period of depression is one of the 



214 BUSINESS BAROMETERS 

factors significant of better business conditions. 

As is the case with most of the others of these 
subjects studied by bankers and merchants, an in- 
crease or a decrease does not at all times mean the 
same thing under all circumstances. Sometimes 
an increase is a dangerous sign and sometimes a 
decrease is a dangerous sign. These things cannot 
be reduced to a rule of thumb, but the merchant 
must use his judgment to a certain extent. The 
rule given above, however, is almost infallible. As 
years go on, it is more and more necessary also to 
tabulate emigration figures in order to ascertain 
the net change. 

There is also another reason why these various 
figures are of interest, namely: because the number 
of aliens entering or leaving the country is not only 
a barometer of business conditions, but it is also 
influential in the trend of such conditions. When 
a foreigner enters this country, he usually brings 
a little money, for he knows that he will need a 
place in which to sleep while here and must have 
some food and clothes. On the other hand, when 
leaving the country he takes from circulation a 
certain amount of money which is almost invari- 
ably many times what he brings into the country. 
In addition he directly reduces the income of some 
landlord and the business of some small grocer and 
dealer in second-hand clothing. 

Therefore, very large immigration figures during 
periods of prosperity mean that there are many 
people who will be obliged to leave the country as 
soon as the period of prosperity culminates, and 



IMMIGRATION 215 

therefore the reaction will be greater and even more 
severe than if they had not entered the country. 
In the same way an increase during a period of de- 
pression not only signifies better conditions, but 
these people entering the country are themselves 
the means of creating better conditions both by the 
amount of money which they bring with them and 
the business which they create after arriving. 

Hence the necessity of tabulating monthly figures 
on immigration. 

The following conclusions are suggested relative 
to immigration figures.* 

1. During a Period of Business Depression. 

(a) An increase after a distinct decrease shows 
that conditions are improving. 

(b) A continued decrease signifies that as yet 
there is no improvement. 

(c) No change signifies that conditions are at 
a standstill. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase signifies continued improve- 
ment. 

(b) A decrease signifies no immediate im- 
provement. 

(c) No change signifies caution. 

3. During a Period of Prosperity. 

(a) A great increase signifies no further im- 
provement or a decline. 



♦These figures have special bearing on the demand for unskilled labor 
in the United States. 



216 BUSINESS BAROMETERS 

(b) A decrease signifies that the corner is 
being turned and a decline may be expected, and 
thus calls for caution. 

(c) No change signifies continued improve- 
ment. 

4. During a Period of Decline Following a Period 
of Prosperity. 

(a) An increase signifies a temporary im- 
provement. 

(b) A decrease signifies no improvement. 

(c) No change signifies nothing definite. 



Note: — There are two exceptions which may be 
taken to using bank clearings as an index. One 
is the fact that, as banks consolidate, the ratio is 
improperly changed; the other is that bank clear- 
ings are increased by the increased cost of com- 
modities and securities, as well as by the increased 
volume of trade. 

The first objection need not be taken very 
seriously as consolidations have always been in 
process and, considering the number of banks, the 
number of consolidations are no greater to-day than 
ever. If this is so, the bank clearing figures are 
perfectly satisfactory for comparative purposes. 

The other objection, that an increase in clearings 
does not necessarily mean an increase in the 
volume of business, is a valid criticism. It there- 
fore is well to always note the change in the 
Commodity Price Index, which index shows how 



VOLUME OF BUSINESS 217 

much allowance should be made when studying 
bank clearings. 

Moreover, as a check on one's conclusion, it is 
well to note railroad tonnage and especially idle 
car figures, as the latter are wholly dependent upon 
the volume of business, and are independent of 
rates or prices. In fact, the only exception that 
can be taken to idle car figures is that the cars are 
increasing so in size and the published figures do 
not include the cars in repair shops. 



CHAPTER VII 

SUBJECTS RELATING ESPECIALLY TO MONE- 
TARY CONDITIONS. 

(For figures for years later than those herein given, see the large sheet in 
the Addenda of this book.) 



MONEY IN CIRCULATION 

THIS subject may, at first thought, seem un- 
interesting and of little concern to the mer- 
chant or manufacturer; yet, as a matter of 
fact, the "Amount of Money in Circulation" is of 
vital interest not only to the merchant and manu- 
facturer, but also to the humblest store-keeper and 
day laborer. 

The trade of the corner grocery store is regulated 
by the amount of money in circulation in the neigh- 
borhood; and the amount of money in circulation 
in the neighborhood is dependent upon the amount 
circulating in the entire country. As the local 
banks in every small town have deposits in some 
large city such as New York, Chicago or St. Louis, 
money cannot be abundant in one city and scarce 
in another, except for a very short time. The 
banks of the various cities are so related through the 
great banking institutions of the large cities, that 
money — like water — immediately seeks its own 
level. As a result, all parts of the country must 
prosper or suffer in accordance with the amount of 
money in circulation. The store-keeper must, 
therefore, study figures of the entire country, and 
not simply the conditions in his own town or in his 
own neighborhood. 






fesJil 



Loans and Resources of the United States Banks 



Date 


Banks Reporting 


1865 


1,960 


1866 


2,267 


1867 


2,279 


1868 


2,293 


1869* 


2,354 


1870 


2,457 


1871 


2,796 


1872' 


3,066 


187* 


1,968b 


1874- 


1,983b 


1875 


3,336 


1876- 


3,448 


1877 


3,384 


1878 


3,229 


1879 


3,335 


1880' 


3,355 


1881 


3,427 


1882' 


3,572 


1883 


3,835 


1884 


4,111 


1885 


4,350 


1886- 


4,378 


1887 


6,179 


1888. 


6,647 


1889> 


7,203 


1890' 


7,999 


1891 


8,641 


1892 


9,338 


189* 


9,492 


1894- 


9,508 


1895 


9,818 


1896. 


9,469 


1897 


9,457 


1898 


9,485 


1899 


9,732 


190O 


10,382 


190 L 


11,406 


1902 


12,246 


1903- 


13,684 


1904 


14,850 


1905 


16,410 


1906 


17,905 


1907 


19,746 


1908- 


21,246 


1909 


22,491 


1910 


23,095 


1911 


24,392 



Loans 

$362,400,000 

550,400,000 

588,500,000 

655,700,000 

686,300,000 

719,300,000 

789,400,000 

871,500,000 
1,439,900,000 
1,564,500,000 
1,748,100,000 
1,727,100,000 
1,720,900,000 
1,561,200,000 
1,507,400,000 
1,662,100,000 
1,901,900,000 
2,050,300,000 
2,233,600,000 
2,260,700,000 
2,272,300,000 
2,456,700,000 
2,944,900,000 
3,161,100,000 
3,475,200,000 
3,842,100,000 
3,965,900,000 
4,336,600,000 
4,368,600,000 
4,085,000,000 
4,268,800,000 
4,251,100,000 
4,216,000,000 
4,652,200,000 
5,177,600,000 
5,657,500,000 
6,425,200,000 
7,189,000,000 
7,738,900,000 
7,982,000,000 
9,027,200,000 
9,893,700,000 
10,763,900,000 
10,438,000,000 
11,373,200,000 
12,521,800,000 

13,046,400,000 ^j,uoi,uuu,uuu jj.' 

Number of national banks only, number of state, etc., not reported 



Resources 


Ratio of loans 


Loans and 


Ratio 
of loans and 




to Resources 


Investments 


Inv. to Res. 


$1,126,500,000 


32.17 


$766,700,000 


68.06 


1,476,400,000 


37.27 


1,015,600,000 


68.79 


1,494,100,000 


39.38 


1,031,600,000 


69.04 


1,572,200,000 


41.70 


1,096,200,000 


69.73 


1,564,200,000 


43.94 


1,100,900,000 


70.38 


1,510,700,000 


47.61 


1,125,400,000 


74.49 


1,730,600,000 


45.61 


1,209,300,000 


69.88 


1,770,800,000 


49.21 


1,302,700,000 


73.57 


2,731,300,000 


52.71 


2,153,100,000 


78.83 


2,890,400,000 


54.13 


2,287,700,000 


79.15 


3,204,600,000 


54.55 


2,541,200,000 


79.29 


3,183,100,000 


53.94 


2,534,400,000 


79.62 


3,204,100,000 


53.68 


2,562,100,000 


79.96 


3,080,600,000 


50.68 


2,427,100,000 


78.78 


3,212,600,000 


46.92 


2,539,300,000 


79.04 


3,399,000,000 


48.90 


2,562,700,000 


73.39 


3,869,100,000 


49.16 


2,902,800,000 


75.02 


4,031,100,000 


50.86 


3,099,400,000 


76.88 


4,208,000,000 


53.08 


3,084,800,000 


73.31 


4,221,300,000 


53;55 


3,291,100,000 


77.96 


4,426,900,000 


51.33 


3,224,300,000 


72.83 


4,521,500,000 


54.33 


3,487,800,000 


77.13 


5,203,700,000 


56.59 


3,944,800,000 


75.80 


5,470,400,000 


57.78 


4,273,200,000 


78.11 


5,940,900,000 


58.49 


4,587,100,000 


77.21 


6,343,000,000 


60.57 


5,000,100,000 


78.83 


6,562,100,000 


60.44 


5,008,400,000 


76.32 


7,245,300,000 


59.85 


5,606,000,000 


77.37 


7,192,300,000 


60.74 


5,722,700,000 


79.56 


7,290,600,000 


56.03 


5,530,300,000 


75.85 


7,609,600,000 


56.09 


5,834,000,000 


76.66 


7,533,900,000 


56.28 


5,925,500,000 


78.44 


7,822,100,000 


53.89 


5,948,300,000 


76.C4 


8,609,000,000 


54.04 


6,511,900,000 


75.64 


9,904,900,000 


52.27 


7,356,600,000 


74.26 


10,785,900,000 


52.45 


8,055,800,000 


74.69 


12,357,500,000 


52.00 


9,246,400,000 


74.82 


13,363,900,000 


53.80 


10,228,400,000 


76.54 


14,303,100,000 


54.11 


11,139,000,000 


77.87 


15,198,800,000 


52.52 


11,636,200,000 


76.56 


16,918,200,000 


53.36 


13,015,100,000 


76.91 


18,147,600,000 


54.52 


13,967,200,000 


76.96 


19,645,000,000 


54.79 


15,141,000,000 


77.07 


19,583,400,000 


52.27 


14,883,900,000 


76.00 


21,095,000,000 


53.91 


15,987,600,000 


75.78 


22,450,300,000 


55.78 


17,245,200,000 


76.82 


23,631,000,000 


55.21 


18,098,300,000 


76.59 



MONETARY CONDITIONS 219 

Many a mill has been closed and many a laborer 
been thrown out of employment because employers 
could not obtain enough actual money to pay 
wages. In times of prosperity such conditions are 
hard to conceive ; nevertheless, they have happened 
and will recur. Sometimes mills continue to oper- 
ate by paying their employees by check, although 
this is a very unsatisfactory method unless the 
checks can be readily cashed. We know of one 
city in Massachusetts where for several weeks in 
1907, all of the factory hands and clerks were paid 
by checks, and moreover by checks marked "Pay- 
able only through Clearing House." Checks so 
marked cannot be cashed. The holders can only 
deposit them in the bank and draw new checks 
against them; and, since these new checks were also 
marked "Payable only through Clearing House," 
it was still impossible for the employees to obtain 
their cash. As 95% of the employees had no bank 
account, the only practical method was for each to 
give his check to one of the local store-keepers, re- 
ceiving credit for the amount. As the man was 
obliged to leave the full amount of the check at one 
store, he found it advisable to select a large depart- 
ment store, carrying dry goods, groceries, medicines 
and other goods. The result was that the business 
of the small store-keepers, excepting that derived 
from their regular "charge" customers, was almost 
ruined during this period; the business of a store, 
the cash sales of which ordinarily amounted to $100 
a day, decreased to only $10 a day. This is but one 
illustration; it shows, nevertheless, how vital an 



220 BUSINESS BAROMETERS 

interest even the humble classes have in the amount 
of money in circulation. 

It is of equal importance to the large merchants 
and to the manufacturers. The small retailer who 
buys only what goods he can sell, immediately, 
ceases purchasing as soon as his business diminishes. 
This immediately affects the business of the manu- 
facturer, who in turn ceases to purchase from the 
large producers. Since the small manufacturer 
buys new material only as needed for actual manu- 
facture, he ceases to purchase in direct proportion 
as he reduces his help. The great merchants and 
manufacturers do not feel the effect, possibly until 
later; but when the blow does come, they feel it to 
a greater extent than the small dealer. It may be 
plainly seen, therefore, that the amount of money 
in circulation directly affects every one, whether 
laborer, clerk, small store-keeper, merchant, large 
manufacturer or the railroad company which trans- 
ports for all. 
The Terms Defined. 

In the discussion of this subject, two different 
"amounts" are referred to, viz.: 

1. The net amount of working money in circu- 
lation. 

2. The gross amount of money per capita, 
whether hoarded or in use. 

These two amounts may be defined as follows: 
The "net amount of working money" means 
the amount of money held by the banks sub- 
ject to check. When a farmer deposits in his bank 
money received from the sale of cotton in Liver- 



MONETARY CONDITIONS 221 

pool, he increases both the net amount of work- 
ing money in circulation, and the gross amount. 
This is likewise true when a bank imports gold from 
abroad ; while the reverse is true when Americans 
spend money in Europe or when money is sent 
abroad in payment for securities held in Europe. 
When, however, a depositor becomes frightened, 
withdraws money from a bank, and hides it in his 
house or in a safe deposit box, he decreases the net 
amount of working money in circulation; but does 
not decrease the gross amount. 

But "the net amount of working money in cir- 
culation" is affected in another way, namely: by 
the amount of money that each man is carrying 
in his pocket. If a man carries eleven dollars in his 
pocket instead of one dollar, he seldom realizes that 
the act is affecting the financial condition of the 
country; but if all the 15,000,000 working men in 
the United States should do this same thing, it 
would make a difference of $150,000,000 in the net 
amount of working money in circulation, or a dif- 
ference of $500,000,000 in the banking resources 
of the country. Thus the net amount of working 
money in circulation represents the amount which 
is actually in the banks or actually at work in com- 
merce and industry; it does not include idle money 
stowed away in pocket-books or safe deposit boxes. 

"The gross amount of money per capita" includes 
all money in the United States whether it is in the 
bank or buried in the ground, at work or idle. All 
money in the safe deposit boxes and in the pockets 
of individuals is counted in this item. This at the 



222 BUSINESS BAROMETERS. 

present time amounts to about $35.00* per capita 
based on the estimated population of the United 
States. The gross amount of money per capita 
simply represents the total of the gold and silver 
coins and bills and bank notes in existence, wher- 
ever located in the United States. It has been es- 
timated that in order to keep this figure in the 
vicinity of $34 or $35 per capita, it is necessary to 
create or import, about $50,000,000 net in coin and 
bills each year. 

Experience has shown that the "net amount of 
working money in circulation" cannot be forecasted 
by figures, but is dependent rather upon sentiment. 
In other words, instead of being dependent upon 
the financial condition, it is dependent rather upon 
the sentiment of the people. This net amount in 
circulation may remain practically constant for 
years until some large failure, scandal or rumor of 
war comes, when the people lose confidence and 
money stops circulating. In such cases everybody 
holds all he has in his possession and free circulation 
is stopped or retarded. Thus the net amount of 
working money is often independent of the gross 
amount of money in circulation. Should a rumor 
be published in the morning papers that some great 
financial institution is in a critical condition, the 
net amount of money in circulation would immedi- 
ately be affected to a greater extent than would be 
possible through years of legislation ; but the gross 
amount of money would remain constant. Fur- 
thermore, such rumors, failures or scandals are the 

*The government figures, however, are not correct, being only a guess. 



MONETARY CONDITIONS 223 

best warnings of impending contraction of the net 
amount of money in circulation. The study of sta- 
tistics in such instances is of little value. In other 
words, as soon as such a thing happens, the mer- 
chant may be reasonably certain that his trade will 
be diminished, and the effect of his curtailment will 
be felt by the manufacturers, the merchants and 
the railroads. 

On the other hand, the merchant should be 
equally on the watch for the time when confidence 
will be restored and when the people will decide to 
part with the money they have been hoarding. As 
it is human nature to hoard money in case of 
trouble, it is also human nature to forget this 
trouble quickly. Moreover, people seem unable 
to withhold money from circulation beyond a cer- 
tain length of time; they become uneasy under the 
loss of interest, and it finally occurs to them that 
their money is in more danger in their houses than 
when deposited in a bank. Thus periods of finan- 
cial stringency, which are caused by the temporary 
withdrawal of money from circulating, are invari- 
ably followed by a great increase in the net amount 
of working money. Nevertheless, the business of 
the merchant does not increase directly in propor- 
tion to the increase of the net amount of working 
money. While business falls off as soon as the 
working money decreases, the reverse is not true. 

When mills are closed and people are out of 
employment, they acquire frugal habits, and after 
the mills again start, they do not at once begin to 
spend; but they deposit their savings in a bank. 



224 BUSINESS BAROMETERS. 

The fact remains, nevertheless, that after these 
periods of fright, money becomes very plentiful 
with the banks and interest rates become corre- 
spondingly low, with a slow but gradual increase 
in business. As the efficiency of money depends 
upon its rapidity of circulation, a contraction in the 
net amount of working money always causes a de- 
crease in general business which requires some time 
to return to a normal state. 

In the case of the "gross amount of money per 
capita," entirely different laws prevail. To quote 
from Theodore E. Burton's admirable book entitled 
"Crises and Depressions" : — "Paradoxical as it may 
seem, the starting point for crises and depressions 
may be found in abundance rather than in scarcity, 
whether in money or in capital." Here he refers 
to the "total gross amount of money per capita" or the 
figures which are studied under fundamental statis- 
tics. The best statistics available may be obtained 
from tables prepared each month by the U. S. Gov- 
ernment. In general, these figures usually show a 
continued increase up to a certain point, at which 
time a panic or a depression comes over the coun- 
try. This is due to the fact that panics and depres- 
sions are so often caused by over prosperity. Therefore 
this gross amount of money per capita is a good barom- 
eter of prosperity. If the gross amount of money 
in circulation, as reported by the government, 
shows a steady increase per capita for several years 
and the country is prosperous — mills running over 
time, labor in great demand, and everybody happy 
and contented — then the merchant and manufac- 



MONETARY CONDITIONS 225 

turer should be on the watch for a turn in the tide. 
In other words, too large an amount of money per 
capita is sure to be followed by a period of disaster 
and trouble. As "pride cometh before destruction 
and a haughty spirit before a fall," so it is likewise 
true that "a large amount of money appeareth be- 
fore a panic and a period of luxury before a period 
of depression." 

The following conclusions may be of interest rela- 
tiev to "Money in Circulation;" but the reader 
should also study Prof. Irving Fisher's new book. 

1. During a Period of Business Depression. 

(a) An increase signifies declining money 
rates, or more satisfactory conditions. 

(b) A decrease signifies higher money rates 
or less satisfactory conditions. 

(c) No change signifies nothing important. 

2. During a Period of Business Improvement. 

(a) An increase forecasts better conditions. 

(b) A decrease forecasts a check or setback. 

(c) No change suggests nothing of impor- 
tance. 

3. During a Period of Prosperity. 

(a) A large increase calls for caution. 

(b) A sudden decrease signifies higher money 
rates and calls for caution. 

(c) No change signifies continued prosperity. 

4. During a Period of Decline Following a Period 

of Prosperity. 

(a) An increase forecasts continued unsatis- 
factory conditions. 



226 BUSINESS BAROMETERS 

(b) A decrease forecasts higher money rates 
and continued unsatisfactory conditions. 

(c) No change suggests caution. 

REPORTS OF THE COMPTROLLER OF THE 
CURRENCY 

Each national bank is required to make five re- 
ports a year to the Comptroller of the Currency. 
The reports are verified under oath by the president 
and cashier, and are attested by at least three di- 
rectors of each bank. They give in detail the re- 
sources and liabilities of all national banks at a date 
specified by the Comptroller, and always previous 
to the date of the call. Each report must be mailed 
to the Comptroller within five days after the request 
is made for it. Such reports are the basis of a most 
useful examination of the banking situation, as they 
include not only figures from all national banks but 
also annual supplementary figures relative to other 
banks. 

These figures should be studied both independ- 
ently and in their relation to one another. In 
other words, the "ratios" should be studied and 
compared. This is one of the principal features of 
these reports as used in connection with the study 
of "Fundamental Statistics." They will be found 
more fully explained under the headings of "Loans" 
and "Cash." 

LOANS OF THE BANKS 
In analyzing reports of the Comptroller of the 



BANK LOANS 227 

Currency, four distinct lines of investigation are 
followed, namely: 

(a) The ratio of bank "Loans" to bank "Re- 
sources." 

(b) The ratio of bank "Loans and Invest- 
ments" to bank "Resources." 

(c) The ratio of "Cash" in the banks to the 
"Deposits." 

(d) The ratio of the "Cash" in the banks to 
the "Resources." 

These four distinct subjects should be studied in- 
dependently before making any deduction or fore- 
casting business conditions. It is also instructive 
to study the relation of loans to deposits. Then 
(a) should be compared with (b), and (c) with (d). 
In order to save time and space, the first two are 
here treated together, and the second two are 
treated together under another heading. 

Bank Loans: Bank loans include notes, discounts, 
overdrafts and all other forms of so-called liquid 
assets. Banks when first organized were expected 
to serve two purposes: they were to receive money 
on deposit and they were to loan it to depositors, 
with the understanding that all deposits could be 
withdrawn and all loans called for payment at any 
time. The most ideal conditions are to be found 
where banks still keep most closely to the standard 
above laid down. All of the assets of a bank other 
than cash on hand, etc., should consist of loans that 
can be liquidated within six months. Therefore 
the term "Loans and Discounts" would include all 
notes, etc., which are either payable on demand or 



228 BUSINESS BAROMETERS 

are payable within six months or a year at the ut- 
most. 

Investments : In reality, a bank is loaning money 
to a corporation whether it purchases its fifty-year 
debenture bonds or its six-months notes. In either 
case the security is the same and the interest 
may be the same. For an investor, the fifty-year 
bonds, if properly secured, are often a more prac- 
tical purchase than the notes; but for a bank the 
same statement cannot be made. Strict adherence 
to the original principle of banking often demands 
that a bank shall refuse to purchase the bonds of a 
corporation of which it may willingly accept the 
notes. 

Notes when purchased by banks may be listed 
under the head of "Loans and Discounts," but 
bonds so purchased must «be listed under the head 
of "Investments." The national law forbids the 
purchase by national banks of real estate, except as 
a building site, or real estate mortgages, because 
real estate cannot be readily sold, even though in 
many cases it is the safest form of investment. 
Logically there seems to be no reason why a national 
bank should be allowed to buy fifty-year bonds 
and forbidden to purchase improved real estate, but 
the fact that the prohibition is made shows that the 
spirit of the law is against all forms of permanent 
investments. Therefore, by such reasoning, all 
stocks, bonds and notes, which do not mature for 
six months or more, come technically under the 
head of "Investments." As there is no law which 
states exactly the difference between "Loans" and 



BANK LOANS 229 

"Investments," banks differ regarding the defini- 
tion, many banks placing under the head of loans, 
even such short term notes as do not mature for two 
or three years. 

Resources: The "Resources" of a bank are the 
same as the resources of any individual or nation. 
They include the notes, discounts, loans, stocks, 
bonds, real estate and other property which the 
bank holds. When a bank makes an appraisal of 
its total assets, figured on a conservative basis, the 
resulting figure represents the "Resources." The 
greater the proportion of "Loans" to "Resources," 
the less normal are banking conditions. 

We think that the above definitions in them- 
selves are sufficient to convince the reader of the 
truth of the following statement: 

(1) The banking situation of the country becomes 
more critical as the proportion of loans to resources 
increases, and improves as the proportion of loans to 
resources decreases. 

If all national banks confined themselves to loans 
and discounts, and made no permanent invest- 
ments, excepting to the extent of their capital, it 
would be a very easy matter to judge the conditions 
in accordance with the above rule. As, however, 
practically all banks are placing more and more 
funds into permanent investments, that item must 
be independently analyzed and the above rule must 
be supplemented by the following: 

(2) With a given fixed ratio of loans to resources, 
conditions become more critical as the proportion of 
investments to resources increases, and conditions im- 



230 BUSINESS BAROMETERS 

prove as the proportion of investments to resources 
decreases. i 

In other words, provided a constant relation ex- 
ists between the funds loaned and the total re- 
sources, the general banking situation is strength- 
ened whenever a bank disposes of long term bonds 
and reinvests the money in high grade commercial 
paper; conversely the general banking situation is 
weakened whenever a bank purchases long term 
bonds with money received from deposits or from 
the payment of high grade commercial paper. 
Therefore, any one studying these conditions should 
note two things: 

(1) Whether the proportion of "Loans" to "Re- 
sources" is increasing, decreasing, or remaining 
fixed. 

(2) Whether the proportion of "Investments" 
to "Resources" is increasing, decreasing, or remain- 
ing fixed. 

Although the most careful students consider these 
terms separately, we think it is generally safe to 
combine the two ideas in the one general rule, as 
follows: 

As the ratio of "Loans and Investments" to "Ag- 
gregate Resources" increases, the hanking situation 
becomes more critical; and as the ratio of the two com- 
bined items to "Aggregate Resources" decreases, the 
banking situation improves. 

The accompanying table shows the record of the 
national, state and private banks and trust com- 
panies of the United States reporting to the Comp- 
troller between 1865 and 1911. A study of these 



BANK LOANS 231 

figures, in connection with the other subjects, makes 
it possible to forecast nearly every period of depres- 
sion and every period of prosperity which this coun- 
try has experienced since the Civil War. These 
figures cannot be expected to foretell the exact 
time when crises or panics will occur, owing to sud- 
den catastrophes such as earthquakes, wars, as- 
sassinations, etc., but they invariably forecast the 
large swings. They clearly show when conditions 
are becoming abnormal and when the pendulum 
is swinging too far from the perpendicular. These 
figures date back only to the Civil War, as the 
system of national banks was not established until 
1863. Consequently this is the only period which 
gives satisfactory data to form a basis for any 
theory regarding the relation of banking conditions 
to general business, and conversely, the effect of 
business conditions upon banking conditions. The 
latter clause is added because, although strained 
banking conditions cause a recession in general 
business, it has always been found true that great 
activity in business has caused strained banking 
conditions. 

Therefore, when business has been very active 
and the country very prosperous, bankers may 
surely anticipate strained and critical banking con- 
ditions. Conversely, when strained banking con- 
ditions have existed for a certain period, business 
men may be sure of a reaction. The figures show 
that after a period during which there was a more 
or less noticeably rapid increase in the ratio of 
"Loans and Investments" to "Resources," there 



232 BUSINESS BAROMETERS 

followed invariably a period of depression until the 
ratio was reduced to a normal point. From 1887 
to 1897 the "Loans and Discounts" increased only 
43% and the "Investments" 73% against an in- 
crease in aggregate resources of 50%. This was a 
normal and healthy increase and all observers were 
sure that the country was preparing for a period of 
marked prosperity, but between 1897 and 1907 the 
"Loans and Discounts" increased 236% and the 
"Investments" 307% against the increase in "Re- 
sources" of 248%. It was due to these figures that 
the bankers and investors who carefully study all 
fundamental statistics were sure that the country 
was entering a period of decline. Such figures 
showed a period of depression to be absolutely nec- 
essary in order to give the banks an opportunity 
to recuperate and again enjoy healthy and normal 
conditions. These figures are still more dangerous 
when it is considered that during the period be- 
tween 1887 and 1897 the aggregate "Resources" 
showed an increase of 50%, even though the market 
value of securities was not increasing. 

During the ten years between 1897 and 1907 the 
increase in aggregate "Resources" was largely due 
to the inflated prices and the growing market value 
of securities held, and possibly not at all to larger 
numbers of investments. These changes, it is true, 
have been irregular rather than constant and have 
caused varying conditions of strength and weakness 
in the banking situation; but the figures plainly in- 
dicate that in 1906 banks were in a very weak con- 
dition with their investments over-extended. The 



BANK LOANS 233 

above figures would appear somewhat different if 
figures of all private banking houses, such as J. P. 
Morgan & Co., Kuhn, Loeb & Co., and others were 
included, but nevertheless they are sufficient. 

Referring to earlier years, we see that in 1873 the 
ratio of "Loans" to "Resources" first exceeded 50% 
and in fact reached a ratio of 52.72%. Conse- 
quently a panic occurred in that year. The ratio 
of "Loans" to "Resources" continued to increase 
to 54.13% and 54.55%> in 1874 and 1875 respec- 
tively, and the prolonged depression was probably 
due to this continued increase. Moreover, this 
item remained practically unchanged until 1879 
when the liquidation was completed. "Loans and 
Discounts," which in 1873 were $1,439,900,000, 
after reaching $1,748,100,000 in 1875, were reduced 
in 1879 to $1,507,400,000. This condition of the 
banks enabled them to loan money at low rates of 
interest and again accommodate legitimate enter- 
prises. Consequently, business increased marvel- 
ously from 1879 to 1883. 

During this period, however, loans had again 
rapidly advanced, — as is shown by the table, — and 
remained practically fixed between 1883 and 1885. 
During this period, that is in 1884, a sharp panic 
occurred which might readily have been antici- 
pated. Although distress was felt in every part of 
the United States, it lasted only a short time in 
comparison with that of 1873. The banks were 
able to reduce their ratio of "Loans and Invest- * 
ments" to "Resources" so quickly that the ratio 
which stood at 77.96 in 1884 was reduced to 72.83 



234 BUSINESS BAROMETERS 

in 1885. Consequently, business became again 
more active, mills resumed operation and railroad 
earnings began to increase. 

In 1886 the new period of prosperity, with ad- 
vancing prices, was in full swing. This movement 
continued without any marked change until the 
early nineties when "Loans" reached a very high 
proportion, 60.57%. Large crops in this country, 
with small crops abroad, helped to postpone trouble 
for a time, but a depression came in 1893 when the 
ratio of "Loans" to "Resources" was even higher 
than in 1890, namely 60.74%. All business men 
and investors who were then studying these figures 
were absolutely sure that a panic would ensue. 

Another disturbance came in 1903 which, al- 
though short, was certainly severe. Railroad earn- 
ings decreased, mills shut down, many men were 
thrown out of employment and money rates were 
very high. Again the western farmer came to the 
rescue of the country, and owing to bountiful crops 
and other reasons, mills again started and business 
improved. This continued until 1907. During 
these years, however, there was no real improve- 
ment in the banking situation except for a short 
time. In 1904 money was very cheap, but only 
temporarily. Banking conditions became worse 
and worse so that students of the situation were 
sure that the improvement from 1904 to 1906 
would be followed by a depression in 1907 when the 
banks might again have an opportunity to recuper- 
ate. This recuperation was completed in 1908, and 
very soon banking conditions were again normal. 



BANK LOANS 235 

The great value of this data to the investor is 
self-evident. When the ratio of "Loans and In- 
vestments" to "Resources" is abnormally high, the 
country is abounding in prosperity and securities 
are selling at high prices, the wise investor sells his 
securities and places his money on deposit in strong 
banks. On the other hand, when the ratio of 
"Loans and Investments" to "Resources"* is low, 
and when, although business is dull and mills are 
not running, his general knowledge of the situation 
shows that fundamental conditions are sound, the 
investor will withdraw his money from the banks, 
purchase high grade stocks and bonds and hold 
them until business again becomes active. 

While in the table above we have given aggregate 
figures for all banks, in order to show general bank- 
ing conditions, such figures are also of service 
relative to the condition of two or more banks. A 
depositor should select a bank whose ratio of 
"Loans" to "Resources" is comparatively small 
and should especially avoid banks with large "In- 
vestment" accounts, — so large as to show a policy 
not in agreement with sound management. 

In the weekly New York Bank Statement, the 
meaning of "Loans" is self-evident. A very small 
figure for "Loans" is not a good sign, neither is a very 
large figure. The former signifies stagnation, the 
latter over-extension. It is important that the figure 
be normal, and that it bear a\proper relation to the 
figure for "Deposits" — thus giving a sound, safe 
amount for "Surplus Reserve." 

*Some prefer to substitute "Deposits" in place of "Resources," and in 
that way check their conclusions, as the "Loans" should not much ex- 
ceed the "Deposits." 



236 BUSINESS BAROMETERS 

The following conclusions regarding the ratio of 
"Loans" to "Aggregate Resources" are suggested. 
The same principles apply to the ratio of "Loans 
and Investments" to " Aggregate Resources." 

1. During a Period of Business Depression. 

(a) An increase in the ratio signifies renewed 
activity. 

(b) A decrease signifies a further recession in 
business. 

(c) No change signifies continued dullness. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase in the ratio signifies increased 
activity. 

(b) A decrease signifies a temporary recession. 

(c) No change calls for special watchfulness. 

3. During a Period of Prosperity. 

(a) An increase in the ratio signifies unsatis- 
factory fundamental conditions. 

(b) A decrease tends to prolong the period of 
prosperity. 

(c) No change signifies nothing of impor- 
tance. 

4. During a Period of Decline Following a Period 

of Prosperity. 

(a) An increase in the ratio signifies further 
trouble. 

(b) A decrease is the natural movement. 

(c) No change calls for special watchfulness. 







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CASH IN THE BANKS 237 

CASH IN THE BANKS 
This subject may be considered in two ways: 

(1) Ratio of the "Cash" in the banks to the 
''Deposits." 

(2) Ratio of the "Cash" in the banks to the 
"Resources." 

In reality these are two entirely different sub- 
jects, as the "Deposits" of a bank are liabilities 
while its "Resources" are assets. Thus, in the 
one case we consider the ratio of "Cash" to liabili- 
ties; in the other, the relation of "Cash" to the 
assets. It is therefore absolutely necessary for the 
student of fundamental statistics to examine 
thoroughly the condition of the banks in relation 
to both points. It has happened during the past 
forty years that the ratio of "Cash" to "Resources" 
has varied almost constantly with the ratio of 
"Cash" to "Deposits," but before considering the 
two subjects together, one should first note if their 
progress is still along parallel lines. 

Having already explained the relation that 
"Loans and Investments" bear to the money sit- 
uation, let us study the effect that "Cash" has on 
the money situation. Of course it is usually true 
that the greater the amount of "Loans and Invest- 
ments," the smaller the amount of "Cash," and 
vice versa. For this reason the following rule is 
already self-evident. 

The banking situation grows more critical as 
the ratio of cash to deposits decreases, and the situation 
improves as the ratio of cash to deposits increases. 

National banks are compelled by law to main- 



238 BUSINESS BAROMETERS 

tain an actual reserve equal to from fifteen to 
twenty-five per cent of their deposits (according 
to the city in which the bank is located) and any 
amount over this required reserve is called the "Sur- 
plus Reserve." As this surplus reserve declines, 
money rates increase, merchants and manufacturers 
are limited in borrowing, and speculators are com- 
pelled to dispose of stocks and bonds in order to pay 
their loans. On the contrary, as the surplus re- 
serve increases, the banks become sounder and are 
ready to loan money to investors, manufacturers 
and merchants at lower rates of interest. ' All of 
this, however, is explained in detail in an article 
on the New York Bank Statement, a few pages 
hence. 

Periods of depression and periods of prosperity 
in the past often could have been anticipated by 
a study of the ratio of "Cash" to "Deposits." 
Whenever there has been a great decline in the ratio 
of cash to deposits or aggregate resources, there has 
always followed a period of contraction of credits; 
and conversely as this ratio increased, lower interest 
rates have always followed. The following table 
shows the ratio of cash to the deposits of the Na- 
tional, State, Savings and other banks and trust 
companies from 1865 to and including June 30, 1910. 

THE RATIO OF CASH TO NET DEPOSITS IN 
BANKS OF THE UNITED STATES. 

Ratio of Cash 
Individual Total Cash in to Individual 

Deposits Banks Deposits 

$641,000,000 $199,400,000 31.11 

815,800,000 231,900,000 28.30 

876,600,000 205,600,000 23.45 

968,600,000 200,700,000 20.72 





No. of Banks 


Year 


Reporting 


1865 


1,960 


1866 


2,267 


1867 


2,279 


1868 


2,293 



CASH IN THE BANKS 



239 











Ratio of 










Cash to 




No. of Banks 


Individual 


Total Cash in Individual 


Year 


Reporting 


Deposits 


Banks 


Deposits 


1869 


2,354 


$1,032,000,000 


$162,500,000 


15.74 


1870 


2,457 


1,051,300,000 


187,700,000 


17.85 


1871 


2,796 


1,251,600,000 


194,000,000 


15.50 


1872 


3,066 


1,353,800,000 


177,600,000 


13.12 


1873 


1,968 


1,421,200,000 


218,200,000 


15.35 


1874 


1,983 


1,526,500,000 


252,200,000 


16.52 


1875 


3,336 


1,787,000,000 


238,700,000 


13.36 


1876 


3.448 


1,778,600,000 


226,400,000 


12.73 


1877 


3,384 


1,813,600,000 


230,500,000 


12.71 


1878 


3,229 


1,717,400,000 


214,600,000 


12.50 


1879 


3,335 


1,694,200,000 


216,300,000 


12.77 


1880 


3,355 


1,951,600,000 


285,500,000 


14.63 


1881 


3,427 


2,296,800,000 


295,000,000 


12.84 


1882 


3,572 


2,460,100,000 


287,100,000 


11.65 


1883 


3,835 


2,568,400,000 


321,000,000 


12.50 


1884 


4,111 


2,566,400,000 


321,200,000 


12.51 


1885 


4,350 


2,734,300,000 


414,300,000 


15.15 


1886 


4,378 


2,812,000,000 


375,500,000 


13.00 


1887 


6,179 


3,308,200,000 


432,800,000 


13.09 


1888 


6,647 


3,422,700,000 


446,100,000 


13.03 


1889 


7,203 


3,778,100,000 


499,100,000 


13.21 


1890 


7,999 


4,-062,500,000 


478,300,000 


11.77 


1891 


8,641 


4,796,800,000 


479,100,000 


11.41 


1892 


9,338 


4,664,900,000 


568,400,000 


12.58 


1893 


9,492 


4,627,300,000 


515,900,000 


11.15 


1894 


9,508 


4,651,200,000 


688,900,000 


14.81 


1895 


9,818 


4,921,300,000 


631,100,000 


12.82 


1896 


9,469 


4,945,100,000 


531,800,000 


10.84 


1897 


9,457 


5,094,700,000 


628,200,000 


12.33 


1898 


9,485 


5,688,200,000 


687 800,000 


12.09 


1899 


9,732 


6,768,700,000 


723,300,000 


10.69 


1900 


10,382 


7,238,900,000 


749,900,000 


10.36 


1901 


11,406 


8,460,600,000 


807,500,000 


9.54 


1902 


12,424 


9,104,700,000 


848,100,000 


9.31 


1903 


13,684 


9,553,600,000 


857,200,000 


8.97 


1904 


14,850 


10,000,500,000 


990,600,000 


9.90 


1905 


16,410 


11,350,700,000 


994,100,000 


8.76 


1906 


17,905 


12,215,800,000 


1,016,400,000 


8.32 


1907 


19,746 


13,099,600,000 


1,113,700,000 


8.51 


1908 


21,246 


12,784,511,169 


1,368,300,000 


10.70 


1909 


22,491 


14,035,500,000 


1,452,000,000 


10.34 


1910 


23,095 


15,283.400,000 


1,423,800,000 


9.32 


1911 


24,392 


15,906,300,000 


1,554,200,000 


9.77 



It is very interesting to note that the ratio of 
"Cash" to "Deposits" decreased in 1891 to prac- 
tically the lowest figure known up to that time, and 



240 BUSINESS BAROMETERS 

in 1893 to a still smaller figure, just before the panic 
of 1893. As in the case of all panics, this resulted 
in the calling of loans and the immediate strength- 
ening by the banks of their cash resources, so that 
in 1894 this ratio had increased more than 32%. 
In the following year the ratio again dropped 13%. 
From 1897 it continued to fall until the next very 
low point reported, namely, for the year ending 
June 30, 1903. At that time, experts in these mat T 
ters publicly prophesied a panic followed by a 
period of depression and, true enough, the following 
year it came, — the panic of 1903. "Resources" in 
1904 were strengthened somewhat, but the im- 
provement was not enough to restore the banks to 
a healthy and normal condition. In fact, the ratio 
was very low from 1904 to 1907, so that, instead of 
the customary number of years of prosperity before 
another depression, the country saw a change for 
the worse in 1907. If the depression of 1903 had 
lasted long enough to enable the banks sufficiently 
to increase their cash resources, improvement 
would probably have gone on until 1912 or 1913; 
but as the banks did not have time to recuperate, 
another depression within a few years was inev- 
itable. This came in 1907-8, and should "Cash" 
again decrease too rapidly, another pause may be 
looked for. 

The figures in the table given above are for the 
entire country, and a study of them is very suggest- 
ive. As they in general are similar to those out- 
lined in the paragraphs on "Loans," they need not 
be described further here. When studying the 



CASH IN THE BANKS 241 

ratio of "Cash" to "Deposits," one must not only 
note this ratio, but must also keep in mind the 
aggregate of cash and the aggregate of deposits. 

Very largely upon this relation does the "price 
of money" or the rate of interest depend. The 
accompanying chart shows this range of rates of 
interest during and after four great panics. Such 
a plot corresponds almost identically with one based 
on the relation of "Cash" to "Deposits," excepting 
that one plot is the reciprocal of the other. 

The following conclusions relative to the ratio 
of "Cash" to "Deposits" are suggested: 

(These general principles also apply to the 
ratio of "Cash" to "Aggregate Resources.") 

1. During a Period of Business Depression. 

(a) After money has been cheap for some 
time, accompanied by large cash figures, a con- 
tinued increase in the ratio of "Cash" to "Deposits" 
signifies that business remains at a standstill. 

(b) A decrease — under the above conditions 
— may be a good sign, showing that business is re- 
viving. 

(c) No change signifies that conditions are 
stationary. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) After money rates have been very low for 
some time, a further increase in the ratio of "Cash" 
to "Deposits" often means that there has been an- 
other recession in business. 

(b) A decrease under such conditions usually 
signifies renewed activity. 



242 BUSINESS BAROMETERS 

(c) No change signifies a period of hesita- 
tion. 

3. During a Period of Prosperity. 

(a) An increase in the ratio of "Cash" to 
"Deposits" tends to prolong the period of pros- 
perity. 

(b) A decrease tends to shorten the period of 
prosperity. 

(c) No change signifies a period of hesitation. 

4. During a Period of Decline Following a Period 

of Prosperity. 

(a) An increase in the ratio of "Cash" tends 
to delay the depression. 

(b) A decrease is very unsatisfactory. 

(c) No change signifies nothing of impor- 
tance. 

DEPOSITS OF THE BANKS 

The rule governing the ratio of "Cash" to "De- 
posits" holds good, except when deposits are in- 
creasing too rapidly, owing to increased prices of 
securities, real estate and commodities. Beside 
studying the ratio which we have described, the 
deposits should be watched independently for 
changes, as deposits should not increase too rapidly. 
The weekly statement of the New York banks will 
serve this purpose. A very simple illustration 
shows how large deposits may be reported at 
considerable risk, but without any intentional 
misstatements of facts. 

A few years ago a miser died in a certain town, 



BANK DEPOSITS 243 

which may be called Graniteville. The executor 
of his estate found $5,000 in gold stored away in the 
house, and deposited it with the Graniteville Trust 
Company, thereby increasing the deposits of that 
company by $5,000. Shortly after, John Smith 
borrowed of the trust company $4,500 of the amount 
deposited in order to buy stone with which to build 
a block of buildings. The local granite company, 
having outside income sufficient to pay its operating 
expenses, deposited the entire $4,500 received from 
Smith with the Graniteville Trust Company; so 
the deposits of the trust company became $9,500 
greater. Soon after, Mr. Jones came into the bank 
and borrowed $4,200 with which to buy stone to 
build a block in another part of the town, and upon 
receipt from the granite company of Jones' $4,200 
the granite company made another deposit with 
the trust company increasing the deposits to 
$13,700. 

The following day a Mr. Brown, by means of a 
loan from the trust company, bought stone, and the 
granite company further increased its deposits to 
$17,500. This same method of procedure was con- 
tinued until the $5,000 in gold which was originally 
deposited resulted in increasing the deposits of the 
trust company by $50,000 and the loans by $45,000. 
Moreover, this $5,000 enabled the granite company 
to suppose it had $45,000 in cash on deposit in the 
trust company, and provided for the building' of 
several stone blocks in the city. In other words, the 
deposit of this $5,000 in gold resulted in creating an 
apparent wealth in Graniteville of about $100,000. 



244 BUSINESS BAROMETERS 

This story shows not only the risks of great in- 
creases in "deposits," but also the importance of 
gold importations in times of stringency, owing to 
the advantage of having on hand as much currency 
as possible. 

When the miser's estate was settled, this $5,000 
was turned over to his only daughter, who had the 
same hoarding disposition as her father. She im- 
mediately withdrew in gold the $5,000 from the 
Graniteville Trust Company and placed the same 
in a safe deposit box with the following result. The 
Graniteville Trust Company, in order to show its 
proper "Reserve," was obliged to demand payment 
of all the loans made to Smith, Jones, Brown, and 
the other men. In order to pay these loans, all of 
these men were obliged to sell the buildings which 
they had erected and, in order to protect the price 
of granite, the granite company was obliged to pur- 
chase these buildings, which necessitated the with- 
drawal of their deposits from the trust company. 
Thus the withdrawal of this $5,000 in gold resulted 
in a $50,000 decrease in the deposits of the trust 
company, caused the $45,000 of cash assets of the 
granite company to vanish, and caused half a 
dozen or more citizens to lose their property, and 
possibly enter bankruptcy. 

The principle should be clearly kept in mind when 
studying the "Deposit" item of the New York 
Bank Statement. Large "Deposits" are not nec- 
essarily a healthy sign. Neither very large nor 
very small "Deposits" are normal. The best bank 
statement is the one where the figures for "De- 



BANK DEPOSITS 245 

posits" are normal and bear a proper relation to 
"Loans," thus showing a proper "Surplus Reserve." 

The exact meaning of these various terms as used 
in the above-mentioned Bank Statement (which is 
issued every Saturday at twelve o'clock noon, 
showing the condition at the close of business on 
Friday) is as follows, according to a valuable 
pamphlet published by Sig. Rosenblatt & Co. 
Loans and Discounts: 

Comprising loans, discounts, stocks, bonds and 
mortgages owned by the bank. 
Specie: 

Comprising gold and silver coin, United States 
and Clearing House certificates, and United States 
silver certificates. 
Legal Tender Notes: 

Comprising United States legal tender notes of 
all issues. 
Circulation: 

The amount outstanding. 
Deposits: 

Gross deposits and unpaid dividends less ex- 
changes for the clearing house, amounts due from 
other banks for collection, notes of other banks and 
checks on non-clearing institutions in the city of 
New York. 

The item of loans and discounts, it will be no- 
ticed, represents, aside from notes, drafts or any 
instrument upon which funds have been loaned out 
by the bank, also United States bonds held as se- 
curity for circulation and for deposits of public 
money, and the stocks, bonds, mortgages, and 



246 BUSINESS BAROMETERS 

syndicate investments of both state and national 
banks. Therefore, changes in circulation may very 
often appear also as a change in loans, since pur- 
chases by the banks of bonds always increase the 
loans; and sales of bonds decrease the loan account, 
if the proceeds are not loaned out or other securities 
purchased. 

It must be kept clearly in mind that all items 
of the weekly statement are made up by averages. 
There are two ways to make up these averages, but 
neither one gives a clear picture of the condition of 
the bank. One way is to add the figures at the close 
of each day's business and divide the total by the 
number of business days in the week. Another 
way is to multiply each of the first day's items by 
the number of business days in the week, and each 
subsequent day's items by one less, and then add 
them and divide the total by 2 1 for a six-day week 
and by 15 for a five-day week. As both of these 
ways are more or less inaccurate, the changes shown 
by the bank statement do not always agree with 
the changes indicated by the reported movement 
of money. 

The surplus against all deposits is computed by 
subtracting one-quarter of the net deposits from 
the cash held. This has to be done, as the main 
reserve banks are required by law to keep a reserve 
of 25% against their deposits. This is true so far 
as it concerns the total surplus. The surplus 
against deposits, other than the United States de- 
posits, is computed by deducting from a quarter 
of the total deposits 25% of the United States 



BANK DEPOSITS 247 

deposits and subtracting the remainder from the 
cash held. 

"As an example take the New York Clearing 

House Statement for the week ending Friday, 
February 15, 1909, 48 banks reporting: 

Total capital of all institutions. $ 124,350,000 

Net profits of all institutions. . . 159,561,100 

Loans average 1,135,248,200 

Specie average 253,424,200 

Legal tender average 60,503,300 

^Deposits average 1,132,309,100 

Circulation average 66,723,500 

In order to find out the surplus 
reserve against all deposits, com- 
pute on the net deposits amount- 
ing to $1,132,309,100 

25%, equal to 283,077,275 

The actual reserve, consisting of 
legal tenders and specie as above, 

amounts to $313,927,500 

Less the reserve required 283,077,275 

Leaving a surplus of 30,850,225 

To find the surplus against de- 
posits other than United States 
deposits, take the total deposits 

of $1,132,309,100 

Deduct U. S. deposits of 59,495,300 

Leaving net deposits of 1,072,813,800 

25% reserve required 268,203,450 

Reserve held 313,927,500 

Surplus 45,724,050 

♦United States deposits included, amounting to $59,495,300. 



248 BUSINESS BAROMETERS 

"Percentage of reserve held by banks was 27.72% 
(25% required), and the surplus above that 
amounted to $45,724,050." 

The above shows how the bank statement ap- 
peared formerly. The question immediately arises 
whether the statement issued by the banks com- 
prising the clearing house, together with the non- 
members' statement, would give an actual picture 
of the banking power of New York City. The 
answer is no, inasmuch as only a few of the trust 
companies are included in the statement. However, 
it is now possible to acquire a comprehensive 
knowledge of banking conditions in Greater New 
York because of the publication of the actual and 
the average condition of the Clearing House banks, 
and because of the compilation, under direction of 
the State Superintendent of Banks, of reports of the 
other institutions under his control, not reporting 
to the Clearing House. These statements are: 

1st. Clearing House members average statement 
for the National Banks, State Banks and Trust 
Companies associated separately and together. 

2nd. Clearing House members actual statement. 

3rd. Average of other banks and trust compa- 
nies not in the Clearing House. 

4th. Aggregate average. 

In order to make the compilation still clearer, the Superintendent 
issues a separate summary of weekly statements of all state banks and 
trust companies. 

It must be borne in mind that the percentage of 
reserve of Clearing House banks represents actual 
cash in bank, while only *5% of cash is required of 

*See notes on page 317 and 384. 



BANK DEPOSITS 249 

trust companies, outside of the association, the re- 
mainder being either certain bonds or deposits in 
other institutions. 

In spite of there still being some weak points in 
the compilation of the statement, as for instance 
that the averages are not figured in the same 
way by all institutions, and also that in the 
item "Loans and Discounts" there are included 
investments, such as stocks, bonds and mortgages, 
which, in fact, should not be included in the loan 
item, we may be very well satisfied with the state- 
ment as now issued. These combined reports, 
however, can never be as valuable as the Comp- 
troller's Reports (mentioned earlier in this chapter) 
which should be most carefully studied by all. 

The following conclusions relative to Bank De- 
posits* are suggested: 

1 . During a Period of Business Depression. 

(a) An increase is to be expected. 

(b) Decrease signifies that business may be 
improving. 

(c) No change signifies continued dullness. 

2. During a Period of Improvement Following 

a Period of Business Depression. 

(a) An increase is to be expected. 

(b) A decrease may signify a recession. 

(c) No change signifies nothing of importance. 

3. During a Period of Prosperity. 

(a) A large increase may signify that under- 
lying conditions are becoming unsound. 

(b) A large decrease may call for caution. 

*When studying "Deposits," only those "Subject to Check" should be 
considered. 



250 BUSINESS BAROMETERS 

(c) No change signifies nothing of impor- 
tance. 

4. During a Period of Decline Following a Period 
of Prosperity. 

(a) An increase in deposits is not normal. 

(b) A decrease in deposits is normal. 

(c) No change calls for special watchfulness. 

SURPLUS RESERVES OF THE BANKS 

The figure for "Surplus Reserve" as given in the 
New York Bank Statement often indicates: 

(a) The Price of Money. 

(b) The Supply of Money. 

The price is determined by the relation of the sup- 
ply and the demand; that is, when more persons 
wish to borrow than to loan, interest rates advance; 
and when a larger number wish to loan than to bor- 
row, the supply is greater than the demand and in- 
terest rates decline. For this reason money rates 
are usually high during the periods of business ac- 
tivity and low during periods of depression. The 
price of money, however, is not as important a 
factor as the supply. In other words, provided the 
merchant can obtain the money when needed and in 
sufficient quantities, an abnormal interest-rate is 
less harmful in its effects than the inability to get 
money at all. 

A variation in the rates for borrowed money has 
a more direct effect upon the market for stocks and 
bonds than upon the market for merchandise. 



BANK RESERVES 251 

When the speculator can borrow money at three or 
four per cent, to purchase securities paying five or 
six per cent., the temptation is to borrow and make 
the purchases, thus increasing the demand and con- 
sequently the market price for the securities. Under 
such circumstances, there is a profit on the "interest 
account," even though there is no increase in the 
value of the investments. On the other hand, this 
increased incentive to purchase does not exist when 
money commands six or seven per cent and secu- 
rities are selling on a four or five per cent basis, for 
then the "interest account" shows a loss. Those 
who have securities upon which they are borrowing 
money are tempted to sell them in order to stop the 
loss in interest. Consequently, the supply of se- 
curities exceeds the demand and the price declines. 

As previously stated, this question of "interest 
rates" is entirely secondary to the question of "sup- 
ply." It is not interest rates that cause the mer- 
chant to fail or the speculator to sacrifice his stocks, 
but rather his inability to renew his loans on 
any terms whatever. Many great periods of de- 
clining prices have been solely due to this cause, 
namely, a lack of supply of money, and the specu- 
lator is not the only one to feel the effect of such 
times. The New York Bank Statement, used in 
connection with the Comptroller's Reports and 
Foreign Money Rates, forms the best barometer of 
the supply of money. 

As to the current price of money, this may be 
definitely determined each day by referring to the 
money articles on the financial page of most daily 



252 BUSINESS BAROMETERS 

papers. The figures under what is known as "call 
rates" or "call money" denote the rates which the 
stock exchange houses and bond dealers are re- 
quired to pay for money on loans which may be 
called any day and on which the rates may change 
from day to day. Sometimes this figure is more 
and sometimes less than the figure for "time-rates." 
"Time-rates" apply to loans maturing at a fixed 
date, such as six months or a year. When the 
bankers having money to loan think that all rates 
are to strengthen in the near future, then the call- 
rate is less than the time-rate, and when the bankers 
having money to loan think that all rates are to 
decrease in the immediate future, then call-rates 
are higher than the time-rates. Some of the 
shrewdest borrowers take time money when the 
bankers are encouraging the people to take call 
money, and vice versa, on the principle that the 
bankers know more about the situation than their 
customers. However, this question of money rates 
is too complicated to present here in detail, espe- 
cially since as has been stated, the price of money 
can be easily ascertained at any time by referring 
to the daily papers. 

The supply of money is the most vital question 
as, unlike the price, it is not so subject to manipu- 
lation. This supply, as above stated, is best indi- 
cated by the weekly New York Bank Statement. 
This is simply a statement of the New York banks 
and does not include statements from any of the 
other twenty thousand banks in the United States, 
nor the great banking institutions of foreign coun- 



BANK RESERVES 253 

tries. The need of a complete weekly bank state- 
ment is already felt. The New York bank state- 
ment is already being made to include certain out- 
side banks, and without doubt the time is coming 
when all of the large banks in this country will re- 
port their condition by telegraph every Saturday 
morning, so as to give a combined statement. This 
will probably be followed later by the banks of every 
country reporting their conditions by cable to Lon- 
don. This will give a bank statement which will 
show the exact financial situation and enable one 
to note the amount of available money as quickly 
and as certainly as he may now note the rate of in- 
terest. Until such a time comes, however, the New 
York bank statement, issued every Saturday noon, 
is the best barometer we have for judging present 
conditions. 

In reading the bank statement one of the main 
points to note is the amount of "Surplus Reserve." 
Two items are always given here: "Reserve Re- 
quired" and "Reserve Held." It should always 
be observed whether the "Reserve Held" is greater 
or less than the "Reserve Required." If the 
"Reserve Held" is greater, then there is a "Surplus 
Reserve," but if not, then there is a "Deficit," 
which is a danger signal to all interested in financial 
or mercantile affairs. Since a "Deficit" occurs, as 
a rule, only just preceding times of panic, possibly 
for a few weeks out of two or three years, the mer- 
chant should notice each week, as he reads the bank 
statement, whether or not the "Surplus Reserve" 
is decreasing or increasing. 



254 BUSINESS BAROMETERS 

So long as the "Surplus Reserve" decreases, a 
corresponding increase in money rates may be ex- 
pected; but if the "Surplus Reserve" increases each 
week, a decrease in money-rates may follow. Since 
the demand for stocks often increases as the in- 
terest rate decreases, money and the stock market 
often strengthen with the publication of what is 
known as a "good bank statement," namely, a 
bank statement which shows an increase in the 
"Surplus Reserve." On the other hand, as an in- 
crease in money rates often forces a sale of stocks, 
due to the calling of the loans, a "poor bank state- 
ment" is often followed by a drop in the market 
prices. When the bank statement is published 
on Saturday, the change in interest rates may not 
come until the following Monday, or possibly later, 
but the speculator anticipates this by buying or 
selling on Saturday. The first sellers after a poor 
bank statement are supposed to obtain the best 
prices, and the first .buyers after a very good bank 
statement are supposed to obtain their securities 
at the lowest prices. 

The word "surplus" implies a difference between 
two items; thus an increase in surplus may be due 
either to a decrease in one of the items, or to an in- 
crease in the other. The best bank statement is 
the one where the increase in "Surplus Reserve" 
is due to a reduction in loans with increased de- 
posits. 

All merchants should keep a monthly record of the 
"Surplus Reserve" as per the first day of each 
month. 



BANK RESERVES 255 

The following conclusions are suggested relative 
to the "Surplus Reserve." 

1. During a Period of Business Depression. 

(a) An increase signifies lower money rates 
but continued dullness. 

(b) A decrease signifies higher money rates 
but improved conditions. 

(c) No change signifies continued dullness. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase signifies that the recovery in 
business is not very marked, and that continued 
low money rates may be expected. 

(b) A decrease signifies continued improve- 
ment and is always the forerunner of higher money 
rates. 

(c) No change signifies uncertainty. 

3. During a Period of Prosperity. 

(a) A great increase signifies that prosperous 
conditions may be expected to continue, with no 
change in money rates. 

(b) A great decrease is often a danger signal 
and is always the forerunner of higher money rates. 

(c) No change may signify either condition. 

4. During a Period of Decline Following a Period 

of Prosperity. 

(a) An increase tends to prolong present 
conditions and to lower money rates. 

(b) A decrease is a sign that conditions are 
growing worse and that higher money rate may be 
expected. 

(c) No change signifies uncertainty. 



256 BUSINESS BAROMETERS 

In this connection some facts from an article 
by George H. Johnson appearing in Van Nor den's 
Magazine relative to "Clearing House Certificates 
and their Effect on the Stock Market" are of 
interest. 

An issue of Clearing House Certificates was 
authorized by the Associated Banks of New York 
City for the ninth time in their history, and the 
fifth time since the Civil War, Saturday morning, 
Oct. 26, 1907. These certificates are a kind of 
emergency currency; they have never been author- 
ized by law, and are used only between banks; they 
stand midway between promissory notes secured 
by collateral and asset currency. 

The first time such certificates were authorized 
was in November 1860. Banks in different states 
had then just suspended payments. November 
12th there was a panic on the Stock Exchange, 
with declines of from 8 to 12 points in the prices of 
stocks. With a view to stopping the panic the 
New York banks decided to be more liberal in 
making loans. To increase their resources they 
appointed, November 21st, a committee of the 
Clearing House to receive from banks in their 
membership, and hold for them, New York and 
United States government bonds, and to issue 
therefore certificates for 75 per cent, of their 
value which would be accepted at the Clearing 
House in payment of balances. To insure the 
redemption of this paper as soon as the emer- 
gency past, the holders were charged 7 per cent, 
interest. The plan was successful in stopping the 



CLEARING HOUSE CERTIFICATES 257 

panic. A period of liquidation ensued. From 
January 5 to August 17, 1861, the specie deposits 
doubled and the bank loans were reduced from 
$129,000,000 to $108,700,000. 

Within a few months thereafter the Associated 
Banks of New York, at three different times, issued 
Clearing House certificates to enable them to sub- 
scribe for new issues of United States bonds which 
could be paid for only in specie. Although these 
certificates were issued for patriotic reasons, all 
those subsequently issued in times of panic, have 
been of substantially the same form as those first 
issued in 1860; but since 1873 the rate of interest 
has been 6 per cent. 

The statistics of these issues by the Associated 
Banks of New York City are given in the following 
table: 



CLEARING HOUSE CERTIFICATES ISSUED IN 

NEW YORK 

Maximum Out- 

v- , Date of Date of tv^„i standing at any 

Year First Issue Final Cancellation lotal Time 

1860 Nov. 23 Mar. 9, 1861 $ 7,375,000 $ 6,860,000 

1861 Sept. 16 Apr. 28, 1862 22,585,000 21,960,000 

1863 Sept. 15 Feb. 1, 1864 11,471,000 9,608,000 

1864 Feb. 29 June 13, 1864 17,728,000 16,418,000 
1873 Sept. 22 Jan. 14, 1874 26,505,000 22,410,000 

1884 May 15 24,915,000 21,885,000 

1890 Nov. 12 Feb. 7, 1891 16,645,000 15,205,000 

1893 June 21 Nov. 1, 1893 41,490,000 38,280,000 

1907 Oct. 26 Mch. 28, 1908 101,060,000 88,420,000 



In 1873 the Philadelphia Clearing House issued 
certificates to the amount of $6,785,000 and in 1890 
to the amount of $8,870,000. In 1893 Philadelphia 



258 BUSINESS BAROMETERS 

issued Clearing House certificates June 16, and had 
outstanding $10,965,000 on August 15. Boston 
and Baltimore issued such certificates June 27, and 
a month later had outstanding a maximum of 
$11,445,000 and $1,475,000 respectively. The 
Pittsburg issues amounted to only $987,000. 
These are the only Clearing House certificates re- 
ported by the Comptroller of the Currency that 
year; but then, as during 1907, some form of cer- 
tificate of this character was issued in nearly every 
large city in the country. 

The most prominent cause of nearly every crisis, 
both abroad and in this country, similar to the one 
through which we passed in 1907, has been the 
rapid absorption of capital in new enterprises — par- 
ticularly those not at once productive. The great 
panic of 1873 followed the extensive building of the 
Northern Pacific and other railroads through an 
unpopulated country. The cost of railroad con- 
struction in this country during the five years 
preceding 1873 was estimated at $1,700,000,000. 
Then the granger laws, which had recently been 
enacted, were regarded by many as effecting a 
virtual confiscation of railroad property. Under 
these conditions the underwriters of the bonds 
issued to pay for new construction found at last 
that the public would not buy them. The re- 
sult was the failure, September 18th, of the banking 
house of Jay Cooke & Company, followed within 
two days by the failure of several other large bank- 
ing and brokerage houses. Prices of stocks fell 20 
or 30 points, and the Stock Exchange, for the first 



1873 



CJearm5,H<n.stC«rti»,c<il»» 

!=!«,> S«pt. 2 *.n;i Total fll.ni.ono 



JANUARY FEBRUARY MARCH" AMU ■ MAT JBHE JULY AUGUST SEPTEMBER i OCTOBER NOVEMBER DECEMBER 




From Van Nor den's Magazine. 

THE COURSE OF THE MARKET IN FOUR PANICS 

These charts show the course of the Stock Market during the panics of 1873, 1884, 
L890, and 1893, and attention is especially called to the abrupt movements in the shaded 
parts, which include the periods during which Clearing House certificates were outstanding. 
The charts arc plotted upon the basis of well-known and generally accepted averages of 
lrom thirty-two to one hundred active stocks. 



CLEARING HOUSE CERTIFICATES 259 

time in its existence, suspended business because 
of the panicky conditions and did not open again 
for a period of ten days. In other respects the 
conditions in September, 1873, were similar to 
those in October 1907. The country banks then, 
as in 1907, drew on their deposits in New York, 
and when the New York banks could not satisfy 
this demand for currency the country banks in 
turn could not satisfy their correspondents and 
depositors; and so there was a partial or entire 
suspension of payments in legal currency which 
continued for forty days. Legal tender notes 
commanded a premium over certified checks 
ranging from one-fourth of one per cent, to three 
per cent., until the New York banks had extensively 
reduced their loans and resumed currency 
payments, November 1st. A long liquidation 
followed which lasted four or five years. From 
the lowest panic prices of 1873 it took twenty- three 
months for the average price of active stocks to 
gain seven points and that was the highest level 
reached within five years after the panic. 

"From 1878 to 1881 there was a rising market 
and extensive railroad construction. Then began 
the great decline which ended in the panic of 1884. 
Again investors were asking whether the value of 
their securities had not been permanently affected 
by the hostile legislation of Congress and the states, 
and this anxiety was accompanied with great dis- 
trust of corporate management. The market was 
congested with railroad securities. A large number 
of mercantile failures in 1883 and the first quarter 



260 BUSINESS BAROMETERS 

of 1884, and several railroad receiverships, caused 
a general feeling of apprehension which culminated 
May 6 in the failure of the Marine Bank and the 
firm of Grant & Ward. Many other failures oc- 
curred through May and June. May 14 it was prac- 
tically impossible for the banks to collect on their 
call loans, as the borrowers could obtain money 
only by the sale of their securities at ruinous prices. 
In the afternoon of that day the New York Clearing 
House again authorized the issue of certificates to 
enable them to make loans. This measure was not 
adopted by any other city at this crisis, although 
monetary disturbance and many failures occurred 
all over the country. This crisis seems to have been 
even more unexpected by the country than that of 
1873, and it proved to be not of long duration. 
Prices of stocks declined still lower in June, but the 
banks in New York were showing rapid improve- 
ment, and by the end of June nearly all the certifi- 
cates except those held by the Metropolitan Bank 
had been retired, and the surplus reserves rose to 
$13,121,625. 

"The panic in the fall of 1890 was preceded by 
the Baring failure in London which was caused by 
immense undertakings in South America. For sev- 
eral weeks in November call money in New York 
often commanded the equivalent of 186 per cent, 
per annum. Clearing House certificates were is- 
sued November 12th but decided improvement in 
the stock market did not begin until the 20th ; 
within the next nine days great strength developed, 
leading stocks advancing from 5 to 8 points. De- 



CLEARING HOUSE CERTIFICATES 261 

cember 4th the Bank of England reduced its dis- 
count rate from six to five per cent., thus virtually 
proclaiming that the panic was believed to be past. 
But although Clearing House certificates had been 
issued in Philadelphia and Boston, as well as New 
York, the banks again had a deficit in their reserves, 
call rates went to 186 per cent., and many new low 
records were made on the Stock Exchange. 

"The panic of 1893 was chiefly due to a fear of 
change in the standard of money and this caused a 
general hoarding of gold. It was preceded by a 
banking panic in Australia. Currency became so 
scarce that Clearing House certificates were issued 
in New York City on June 21, and in other cities 
shortly after to the aggregate amount of tens of 
millions of dollars; but conditions did not improve 
until nine weeks later. Meantime banks were 
failing all over the country, currency was at a 
premium ranging from one to seven per cent., and 
cash payments were comparatively rare. After 
the House of Representatives voted August 28 for 
the repeal of the silver purchase law the whole 
situation changed. The currency famine and high 
interest rates had stimulated the importation of 
gold and the increase in national bank circulation. 
The reaction was inevitable. In December the 
call rate for money declined to three-fourths of one 
per cent." 

The course of the stock market in four of these 
panic years, as indicated by the average price of 
active railroad stocks, and the duration and amount 
of Clearing House certificates issued is shown on the 



262 BUSINESS BAROMETERS 

accompanying diagrams. There is nothing in 
these plots to indicate that prices were inflated by 
the issuance of Clearing House certificates, but 
rather that they served their purpose, which is to 
supply in part the deficiency of currency caused by 
hoarding, and so check a ruinous decline in prices. 
Desperate emergencies call for extraordinary reme- 
dies, and for nearly half a century Clearing House 
certificates have never failed to relieve the worst 
panics and enable business to continue, where with- 
out them it would have been impossible. 

If an asset currency could be provided by Con- 
gress which could be used as required by banks in 
all parts of the country, which would be as quick of 
issue, as safe and as efficacious as Clearing House 
certificates in an emergency and with similar 
limitations as to volume and duration, it would be 
one of the most beneficent laws ever enacted. But 
booms and panics are the result of fundamental laws, 
some of which are financial and economical and 
others social and psychical. The provision of an 
elastic currency which would automatically adjust 
itself, through taxation, to the needs of business 
would do much to relieve panicky conditions; but 
some of these conditions which come in cycles, and 
others which come occasionally from dishonesty 
and mismanagement in high places can never be 
wholly prevented by legislation. Moreover, the 
diagrams clearly show that the forced liquida- 
tion which naturally continues for several weeks 
after any panic in the stock market generally car- 



IMPORTS OF MERCHANDISE 263 

ries prices to a still lower level notwithstanding aid 
which has been given by Clearing House certifi- 
cates. 

IMPORTS OF MERCHANDISE INTO THE 
UNITED STATES 

Connected with fundamental statistics and very 
closely related to one another are the three following 
subjects: 

Imports of Merchandise into the United States. 

Exports of Merchandise from the United States. 

Balance of trade between foreign countries and 
the United States. 

Each of the three subjects is absolutely depend- 
ent upon the others and were it not for the separate 
tables connected with each subject, it would doubt- 
less be simpler to treat all three in one compre- 
hensive section entitled "Imports, Exports, Trade 
Balances and Volume." Owing, however, to the 
fact that it is absolutely necessary for the banker 
or merchant to divide the figures into three separate 
tables and not allow them to be combined in any 
way, each is here treated independently. 

No detailed definition need be given of the im- 
ports of the United States except that the word 
import refers to the valuation of the raw material, 
manufactured goods and all other products pur- 
chased from abroad and entering any port or cross- 
ing any boundary of the United States. It may 
be mentioned also that although the figures pub- 



264 BUSINESS BAROMETERS 

lished by the Government are correct for compara- 
tive purposes, they are, as a matter of fact, low. 
For this there are two reasons: first, there is a 
large quantity of goods brought into this country 
of which no record is ever made; and secondly, the 
"values" are placed by the importers at the lowest 
possible figures in order that the charge for duty 
will be as little as possible. 

(Figures prior to 1867 are given for the fiscal 
year ending June 30. After that year they are for 
the calendar year.) 



TABLE OF UNITED STATES IMPORTS 



Year 
1860 
1861 
1862 
1863 
1864 
1865 
1866 
1867 
1868 
1869 
1870 
1871 
1872 
1873 
1874 
1875 
1876 
1877 
1878 
1879 
1880 
1881 
1882 
1883 
1884 
1885 



Imports 


Per Capita 


$353,616,119 


$11.25 


289,310,542 


9.02 


189,356,677 


5.79 


243,335,815 


7.29 


316,447,283 


9.30 


238,745,580 


6.87 


434,812,066 


12.26 


371,476,175 


10.23 


368,006,572 


9.94 


438,455,894 


11.60 


461,132,458 


11.97 


573,111,099 


14.47 


655,964,699 


16.15 


595,248,048 


14.27 


562,115,907 


13.13 


503,153,936 


11.43 


427,347,165 


9.47 


480,246,300 


10.37 


431,812,483 


9.07 


513,602,796 


10.52 


696,807,176 


13.88 


670,209,448 


13.06 


752,843,507 


14.36 


687,066,216 


12.81 


629,261,860 


11.48 


585,868,673 


10.49 



IMPORTS OF MERCHANDISE 265 



Year 


Imports 


Per Capita 


1886 


$ 663,429,189 


$11.57 


1887 


708,818,478 


12.09 


1888 


725,411,371 


12.11 


1889 


770,521,965 


12.58 


1890 


823,397,726 


13.15 


1891 


828,320,934 


12.96 


1892 


840,930,955 


12.91 


1893 


776,248,924 


11.68 


1894 


676,312,941 


9.97 


1895 


801,669,347 


11.60 


1896 


681,579,556 


9.66 


1897 


742,595,229 


10.32 


1898 


634,964,448 


8.66 


1899 


798,967,410 


10.68 


1900 


829,149,714 


10.86 


1901 


880,419,910 


11.34 


1902 


969,316,870 


12.30 


1903 


995,494,327 


12.42 


1904 


1,035,909,199 


12.71 


1905 


1,179,144,550 


14.24 


1906 


1,320,501,572 


15.69 


1907 


1,434,421,425 


16.55 


1908 


1,116,449,681 


12.85 


1909 


1,475,520,205 


16.66 


1910 


1,562,807,622 


16.98 


1911 


1,531,227,281 


16.16 



In studying the above tables it is convenient to 
refer to only the "per capita" column which shows 
very clearly the great value of these figures in fore- 
casting a panic. At the close of the Civil War the 
people were importing on a basis of about $10 per 
capita and this steadily increased to over $16 in 

1872. This increase was far above what it should 
have been, and was therefore naturally followed by 
the panic, which came the following year, namely, 

1873. As is the case with all panic years, the im- 
ports immediately dropped off from $16 to about 
$14 and steadily decreased for about five years. 

Beginning with 1879 the imports again increased 
and property likewise increased until 1882, when 
they again reached $14.36 per capita. Although 



266 BUSINESS BAROMETERS 

this figure was not equal to the previous high 
figure for 1872, yet the rise was more rapid and it 
is not surprising that in the latter part of the fol- 
lowing year there occurred another panic, namely, 
the panic of 1883-4. In 1885, or directly after 
this panic, imports again dropped to a minimum 
of $10.49, but gradually increased along the nor- 
mal line until they reached over $13.00 per capita, 
at which point they remained constant during 
1890, 1891 and 1892. As could readily have been 
predicted, these high figures were followed by an- 
other panic in 1893. During the next year, as is 
invariably the case, the imports again declined to 
$9.97. Since that time they have increased at a 
more or less irregular rate, up to 1907, when they 
again reached $16, at which figure they stood pre- 
ceding the great panic of 1873. Then followed a 
sharp reduction to $12.87, coincident with the panic 
of 1907-08 and its curtailing of imported luxuries. 
With the year 1909 imports have again increased 
to the above figures, therefore showing that the 
same law has been observed in connection with all 
panics excepting that of 1903, which, as explained 
under "New Securities," was chiefly due to one 
specific cause as stated by Mr. Morgan, namely, 
"the congestion of undigested securities." Where 
the figures on 80% of our subjects clearly forecasted 
all panics excepting said panic of 1903, in only a 
few tables was the approach of this panic indicated. 
On the other hand, in these few tables, especially 
the table for "New Securities Listed" and "New 
Corporations," the increase was so tremendous, 



IMPORTS OF MERCHANDISE 267 

several hundred per cent., that they of themselves 
were a sufficient danger signal, even though the 
figures on the other subjects appeared normal. 

Thus in studying the figures on imports, we see 
that too great an increase in imports is a dangerous 
sign. This is due to two reasons: first, it neces- 
sitates the exportation of too much gold; and 
secondly, it signifies too great an extravagance on 
the part of the American people. As continued ex- 
ports of gold are usually followed by advanced 
money rates, so too great an expenditure of money 
for luxuries and unproductive material, especially 
when imported, is followed first, by higher com- 
modity prices, and then by a period of economy. 

Not only are large figures for imports suggestive 
of a panic, but small figures, especially when they are 
increasing at a slow and conservative rate, are sug- 
gestive of better times. This latter phase is espe- 
cially well illustrated in an article which appeared 
some time ago in the New York Evening Post. 
This began by referring to a Wall Street man who 
rather facetiously remarked that good times were 
surely coming for he noticed that people were 
"wearing their old clothes." This remark, made 
carelessly, was nevertheless a statement of the tre- 
mendously important factor which personal thrift 
becomes during a period of depression. 

In times of abounding prosperity it is easy for 
people to assumea contemptuous attitude toward 
petty economies. The talk is of making money, 
not of saving it. But a panic brings out the eco- 
nomic truth about the relation of savings to new 



268 BUSINESS BAROMETERS 

business operations. "It must always be remem- 
bered," writes Lord Welby, commenting on an 
American panic in the Contemporary Review, 
"that the capital required to extend business and 
to open new fields of trade can only be supplied by 

the savings of the world But there is a 

limit to these accumulations, large as they are. If 
the passions of the world, the extravagance of the 
world, and above all the growing needs of the world 
trench too closely on the accumulations of the world, 
financial stringency will inevitably be the result." 
And it is a fact that even the most trivial form of 
saving becomes a large financial operation when 
generally practised. 

How much can the American nation save should 
each man wear his clothes two years instead of one? 
The census report of manufactures shows that the 
factory product of men's clothing during a good 
year is valued at about $375,000,000. One-third 
of this, or considerably less than one-third on the 
basis of retail prices, would more than equal the 
entire balance of trade in this country's favor in a 
normally favorable month. There are over $40,- 
000,000 worth of felt hats sold during a good year. 
By wearing their felt hats 50% longer than they 
have been accustomed to doing, plain Americans 
can effect a saving in a year greater than the 
great gold imports necessary to adjust conditions 
during a critical period. 

Yet it is not always with clothes that people 
adopt a policy of retrenchment. If, for example, 
they cut down by only one-third the amount they 



IMPORTS OF MERCHANDISE 269 

spend on fresh beef, leaving all other items on the 
butcher's bill unaltered, the sum would be greater 
than twice the amount paid over the counters of the 
bank, which in October 1907, endured the longest 
"run" in the history of banking institutions. Con- 
tract by the same proportion the consumption of all 
kinds of meat, — and many authorities think this 
would be well worth while from a hygienic point of 
view alone, — and a sum equal to the entire Govern- 
ment surplus at the time of the panic on Nov. 1, 
1907, would be saved in less than ten months. 

As to the commodities which are classed as 
real luxuries, the facts are equally striking. 
Enough cigars were "withdrawn for consumption" 
in 1907 to provide about eight and one-half cigars 
a week for every smoker, on the assumption that 
one-fifth of the total population, including babes in 
arms, may fairly be put down in that class. Even 
for mere purposes of illustration, no one would be 
cruel enough to suggest treating the cigars as the 
colonists once treated the tea. But in a great 
emergency the average smoker might consider cut- 
ting down his allowance to one cigar a day. That 
trifling act would make a difference in the country's 
cigar bill of three and one-half millions a year. 

Imports of luxuries into the United States 
during the fiscal year ended June 30, 1909, were 
valued at $210,872,120, as compared with $173,- 
217,690 in 1908 and $227,661,584 in 1907. This 
class of imports represented 16% of total imports 
in 1909, 14% of the total in 1908 and 15% in 1907. 
The increase of $37,654,430 from 1908 was one in- 



270 BUSINESS BAROMETERS 

dication of the return of prosperous business con- 
ditions. The 1909 value, however, is $16,789,464 
below the figures for 1907. 

Outside of imports of silk, both manufactured 
and unmanufactured, having a value of $110,622,- 
169, imports of wines and spirits played no small 
part in the total imports of this country. Cham- 
pagne imports, amounting to 436,628 dozen quarts, 
with a value of $6,863,785, were the largest during 
the same fiscal year (1909) in the history of the coun- 
try and showed a very perceptible increase over 1907. 
The increase over 1908 totalled 68,959 dozen quarts, 
or 18%. 

Uncut diamond imports were valued at $19,- 
313,585; and, while the value was $10,001,490 or 
over 100% greater than during 1908, it was still 
$4,651,853 below the total value for 1907. Total 
precious stone imports, having a value of $29,373,- 
070 the past fiscal year, were over 70% greater than 
during 1908, but considerably below the total for 
1907. 

The above suggestions are sufficient to illustrate 
the reason for tabulating not only annual but also 
monthly figures on imports, namely, as a barometer of 
waste or of economy. It is, however, unnecessary that 
the monthly figures should be tabulated on a per capita 
basis, as the change in population is so slight. 

Many merchants when studying foreign trade, 
instead of considering exports and imports sep- 
arately, add them together and call their sum the 
volume of foreign trade. This figure is valuable as 
a barometer of general business activity. It should 



IMPORTS OF MERCHANDISE 271 

not be confused with the balance of trade which is 
the difference between exports and imports and is 
watched by bankers for its effect upon the money 
rates and gold supply. 

The following conclusions are suggested relative 
to "Imports."* 

1. During a Period of Business Depression. 

(a) A normal increase signifies that condi- 
tions are improving, — provided said increase does 
not adversely affect the balance of trade. 

(b) A decrease signifies no improvement. 

(c) No change signifies nothing of importance 
provided the exports are likewise constant. 

2. During a Period of Improvement Following a 

Business Depression. 

(a) An increase, if not too great, signifies 
continued improvement. 

(b) A decrease signifies no immediate im- 
provement. 

(c) No change signifies nothing of impor- 
tance, provided the exports are likewise constant. 

3. During a Period of Prosperity. 

(a) An increase, especially if abnormally 
large, is a sign that no further improvement may be 
expected. 

(b) A decrease tends to lengthen the period of 
prosperity, and is therefore a sign of continued im- 
provement. 

(c) No change signifies nothing definite. 

*These figures are valuable both as a barometer of the American demand 
for luxuries and for forecasting money conditions. 



272 BUSINESS BAROMETERS 

4. During a Period of Decline Following a Period 
of Prosperity. 

(a) An increase calls for caution. 

(b) A decrease signifies no improvement. 

(c) No change calls for caution. 

EXPORTS OF MERCHANDISE FROM THE 
UNITED STATES 

By "exports" is meant the goods shipped from 
the United States to any foreign port or country. 
This includes all raw materials, manufactured arti- 
cles, and in fact anything for which a resident of 
the United States receives money. 

The monetary condition of the country depends 
on three things: 

1st. The amount of money in the country. 
2nd. The demand for money. 
3rd. The velocity of circulation. 

The first item, namely, the amount of money in 
the country, is very dependent upon the exports of 
the country. Technically, this is dependent upon 
the balance of trade, a term explained in the next 
section of this chapter, but practically it is depend- 
ent upon the exports. 

Formerly the amount of exports was depend- 
ent almost entirely upon the amount of raw ma- 
terial produced; that is, wheat, corn, cotton, live 
stock, products, etc. The condition of the main 
crops of wheat, corn, and cotton, as well as that of 
the smaller crops, such as hay, apples, potatoes, etc., 
determined the exports. With small crops the ex- 



EXPORTS OF MERCHANDISE 273 

ports were very small, while with large crops the 
exports were large. 

This condition, however, has changed during the 
past twenty years, in which period there has been 
a very great increase in exports. The total exports 
of the United States have increased from $800,000,- 
000 to $1,700,000,000 or $1,800,000,000 and this 
increase has been much larger in manufactures than 
in other products. In 1890 the United States was 
exporting about $700,000,000 in food products and 
raw materials, which amount increased only to 
about $1,100,000,000 in 1908,— an increase of less 
than 60 per cent. On the other hand, the exports 
of manufactured products increased from about 
$180,000,000 in 1890 to nearly $750,000,000 in 
1908, — an increase of more than 300 per cent. 

It is important to note the change in the pro- 
portions between the agricultural and manufac- 
tured exports for, if exports are to depend upon 
manufactured articles rather than on raw materials, 
bread-stuffs, etc., must tend to eliminate the decline 
in exports which heretofore has occurred during 
years of crop failures. Andrew Carnegie has said 
that the time is coming when the greater part of 
the raw materials, now forming the bulk of the 
export figures of this country, will be used here, and 
their place in export trade will be taken by manu- 
factured articles. If so, the American manufac- 
turers must reach the markets of the world and 
compete therein with all the other industrial and 
commercial nations. 

If this is so, and the figures for the past eighteen 
years seem to prove it, our exports probably will 



274 BUSINESS BAROMETERS 

not only continue to increase, but the fluctuations 
will, as above suggested, be much less marked. 
This is another reason why we should carefully 
study the figures on the "balance of trade," rather 
than the figures on the "exports" or "imports" 
exclusively. 

There is one point in connection with exports, 
however, that the merchant and investor should 
especially remember, namely, that in the ordinary 
course of events, exports continue to increase for 
some time after a period of depression begins, 
although the proportion of exports to imports de- 
creases. This is due to the fact that the momentum 
of the energy which increased production and ex- 
ports during the period of prosperity itself, does not 
immediately lose its force. Moreover, the increase 
in exports usually continues until increased activity 
at home increases demand and prices, after which 
exports begin to diminish. Therefore, during a 
period of prosperity, a decrease in exports is a dan- 
gerous sign, as it tends to adversely affect the bal- 
ance of trade. This is also true at the beginning of 
a period of depression ; but after a period of depres- 
sion has been existing for some time, then a de- 
crease in exports is often a favorable sign, as it 
shows that home consumption is increasing. These 
facts suggest the necessity of systematically tabulating 
the monthly figures on exports. Neither these figures, 
however, nor the figures on imports need to be plotted. 

Many merchants when studying foreign trade, 
instead of considering exports and imports sep- 
arately, add them together and call their sum the 
volume of trade. This figure is valuable as a ba- 



EXPORTS OF MERCHANDISE 275 

rometerof general business activity. It should not 
be confused with the balance of trade which is the 
difference between exports and imports and is 
watched by bankers for its effect upon the money 
rates and gold supply. 

The following conclusions are suggested relative 
to "Exports" and also relative to "Volume of 
Foreign Trade:"* 

1. During a Period of Business Depression. 

(a) An increase signifies an improvement. 

(b) A decrease signifies no improvement. 

(c) No change calls for caution. 

2. During a Period of Improvement Following a 

Business Depression. 

(a) An increase signifies continued improve- 
ment. 

(b) A decrease signifies no improvement. 

(c) No change signifies nothing definite. 

3. During a Period of Prosperity. 

(a) An increase signifies continued improve- 
ment. 

(b) A decrease signifies no further improve- 
ment or that a decline may be expected. 

(c) No change calls for caution. 

4. During a Period of Decline Following a Period 

of Prosperity. 

(a) An increase signifies an improvement. 

(b) A decrease signifies no improvement. 

(c) No change calls for caution. 

*These figures are valuable both as a barometer of foreign trade con- 
ditions and for forecasting money rates. 



276 BUSINESS BAROMETERS 

BALANCE AND VOLUME OF TRADE 

One of the most important of the subjects that 
investors and merchants study when analyzing 
present conditions and forecasting future conditions 
is the balance of trade. When we have sold to 
foreign merchants raw materials or merchandise 
greater in value than that which they have sold 
to us, the balance of trade is said to be "in favor 
of" the United States as against foreign countries. 
This naturally results in the shipment to America of 
gold, to adjust the balance, or the selling in the 
United States of "exchange" at a discount, if the 
condition is but temporary. The balance of trade 
does not always determine the debtor country, as there 
are other factors to be considered, but as a rule this 
is the case. 

The "other factors" above referred to, are such 
factors as the sale of American securities abroad or 
the payment of interest by the United States and 
corporations therein to foreign security holders. 
Although from the bond dealer's point of view it is 
very advantageous to have a large and wide foreign 
market for American securities, thus leaving so 
much more "home" money free for investments, 
yet it must always be remembered that each year it 
may be necessary to ship gold from the United 
States to pay the interest on these securities and 
that eventually gold must be shipped to pay the 
securities themselves. Moreover, the amount of 
gold exported during the year that these secur- 
ities are paid or when at any time before they 
are due the foreign dealers decide to sell them, will 



BALANCE OF TRADE 277 

often nullify the good of a certain portion of the 
trade balance in our favor for that year. 

If trade balances were dependent wholly on the ex- 
ports and imports of raw material, merchandise, etc., 
it would be unnecessary for merchants and investors 
independently to tabulate monthly figures on gold 
movements in addition to tabulating monthly figures 
on exports and imports. Owing, however, to these 
additional factors, caused by the sale of securities, 
payment of interest, etc., it is necessary to tabulate 
figures also on gold movements and these other factors. 

Certain merchants when tabulating figures on 
the balance of trade, which is the difference between 
the exports and imports, also tabulate figures show- 
ing the sum of the exports and imports or what is 
known as the "volume." This is wholly unnec- 
essary when the imports and exports have been 
tabulated separately, but rather is of use simply as 
a short-cut to avoid the necessity of tabulating 
both imports and exports separately. Figures, 
then, on imports, exports and the balance of trade, 
when tabulated each month serve as a wonderful ba- 
rometer for discerning present conditions and for fore- 
casting future conditions. 

Although the foreign trade statistics of other 
countries, when properly compiled for comparative 
purposes, are of interest to those studying the con- 
ditions of the United States, such figures are not 
conclusive in comparing the trade of two different 
countries. As there is no uniformity in the classi- 
fication in the exports and imports of two different 
countries and as the methods of valuation are also 



278 BUSINESS BAROMETERS 

entirely different, it is very dangerous to make com- 
parisons between the various countries.* 

The following conclusions are suggested relative 
to the "Balance of Trade in favor of the United 
States" 

1. During a Period of Business Depression. 

(a) An increase signifies an improvement. 

(b) A decrease signifies no improvement. 

(c) No change signifies that money rates may 
depend wholly on domestic conditions. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase signifies continued improve- 
ment. 

(b) A decrease signifies no improvement. 

(c) No change signifies that money rates will 
depend wholly on domestic conditions. 

3. During a Period of Prosperity. 

(a) An increase signifies continued improve- 
ment. 

(b) A decrease signifies no improvement, or 
perhaps the end of the period of prosperity. 

(c) No change signifies nothing of impor- 
tance. 

4. During a Period of Decline Following a Period 

of Prosperity. 

(a) An increase signifies that lower money 
rates may be expected, and a possible improvement. 

(b) A decrease signifies no improvement. 

(c) No change signifies nothing of importance. 

*This matter is discussed very clearly in an article on the "Comparata- 
bility of Trade Statistics of Various Countries" by Sir A. E. Bateman, 
C M. G., published by the American Statistical Association, New Series 
"1893" Vol. 3, page. 533. 



GOLD MOVEMENTS 279 

GOLD MOVEMENTS 

The following by a well known writer is a good 
explanation of this subject: 

"The natural movement of gold divides itself 
readily into four classes. There is in the first place 
the primary movement from the mines to the dis- 
tribution centers, London for the European markets 
and New York and Seattle for the United States. 
After that comes what might be called the first 
distributive movement, where the gold arriving, 
for instance, at London, is sold to the highest bidder, 
often representing far off countries. A readjust- 
ment movement follows where gold, for instance, 
purchased by Paris in London is sent on to Switzer- 
land, Italy, or Belgium or any other points. Lastly 
there is a constant flow of gold from one part of the 
world to another, the movement of which is due to 
the ancient causes of supply and demand, of trade 
and other balances to be paid, and of bank reserves 
to be built up or released. 

"Whatever schemes of international gold certi- 
ficates or of an international clearing house may be 
proposed by financial economists for the purpose of 
reducing the gold movement, there can never be 
any question as to the necessity of the primary 
movement from the mines to the distributive cen- 
ters. Roughly speaking, the world's gold produc- 
tion originates in three great sections, South Africa, 
Australia and the United States. From the former 
comes almost half of the gold mined in the world 
each year, and therefore bankers and merchants 
tabulate the monthly production of the Rand Mines. 



280 BUSINESS BAROMETERS 

"The great distance of these localities from any 
important financial market and the fact that most 
of the stock of the South African and Australian 
gold mines is held in England, makes London the 
point to which the product of those mines is natu- 
rally sent, so that nearly one-half of the world's 
annual production of gold comes into the London 
market for distribution. 

"Arrivals of gold consigned to the London agents 
of the South African and Australian mines are fully 
advertised, and what amounts to a regular auction is 
held every time a consignment arrives. The Bank 
of England is always ready (must be, by law) to 
purchase all gold of standard fineness offered to it, 
at 77 shillings 9 pence per troy ounce. But very 
rarely does the bank, or any one else, secure bul- 
lion at this price. Usually the bidding of the rep- 
resentatives of the various banks puts the price well 
above that figure. 

"London is the one free gold bullion market of 
the world. As the metal arrives from the mines it 
is sold to the highest bidder without fear or favor. 
But this process must not be confused with the 
gold market maintained by the Bank of England. 
Usually the Bank will sell gold bars at a price, but' 
sometimes it will not, and then the cry goes up that 
London is no longer a free gold market. As a mat- 
ter of fact, the Bank of England is far from being 
a free gold market, but the open market is free and 
as long as there is any gold coming in, the highest 
bidder gets it. 

"In the United States on account of our entirely 



GOLD MOVEMENTS 281 

different currency law, there is no bullion market at 
all, free or otherwise, and the primary movement 
is direct from the mines to the assay offices, where 
a fixed and unvarying price is paid for it. In other 
words, all the gold produced in this country im- 
mediately passes into its circulation. There is no 
long trip to an open market, and then an apportion- 
ment, to all parts of the world. The owner of the 
gold takes it to the nearest government assay 
office, where it is assayed and bought from him at 
so much per ounce. Afterwards if any one needs 
gold bullion, for export or other purposes, he can ob- 
tain it at the treasury at a fixed price, as long as the 
supply holds out. 

"The very fact that there is a primary movement 
of gold from the Australian and South African 
mines to London makes necessary the distributive 
move to the various markets, whose representatives 
at the British capital have been successful in their 
bidding for this new supply. But even after that 
comes another movement, for the smaller markets 
are not directly represented in London, but must 
obtain the supplies of gold they need through their 
important correspondents. 

"These three movements carry the gold from the 
place where it is mined to the lesser banking cen- 
ters, where its distribution is complete. But the 
movement of the metal by no means comes to an 
end with its distribution. There follows a fourth 
movement, dependent entirely upon financial con- 
ditions, the movement which will often result in 
the practical transfer of all or part of some 



282 BUSINESS BAROMETERS 

firmly established gold supply to some distant 
market." 

There are three distinct influences which bring 
about such movements. The first is the necessity 
of making international payments for merchandise 
or securities at times when exchange is scarce; 
the second has to do with the maintenance or 
restoration of bank reserves, which can at times be 
accomplished only by the outright purchase of 
gold in other countries; the third is due to inter- 
national operations where bankers are anxious to 
transfer large balances from one point to another, 
and not finding exchange available in quantity 
send gold instead. 

From the very nature of these causes, it will 
readily appear that it is a mistake to imagine that 
the development of our international financial 
relations will eventually make it unnecessary to 
ship gold at all. Only one of them, the first, could 
possibly be affected by the arrangement of a 
system of international credits. These large pay- 
ments by one country to another, such, for instance, 
as the payment for the Panama Canal or the 
payment to us of the San -Francisco fire indemnity, 
continually have to be made, and often under 
circumstances and at times when it is impossible 
that there should be a sufficient amount of exchange 
available. It is hard to see how, even if an inter- 
national system of crediting and debiting should be 
arranged, payments of this kind could eventually 
be settled by remittances of gold or exchange, and 
as for gold shipments arranged for the building up 



GOLD MOVEMENTS 283 

or maintenance of bank reserves, it will appear 
that, as the bankers of different countries become 
more closely allied, the interchange of gold is 
greatly facilitated. Through various causes the 
gold reserve of the banks, particularly the great 
national banks of Europe, becomes depleted at 
times, and then these institutions are apt to call 
upon their foreign connections to send them the 
gold they need. 

The other reason which makes gold, often ap- 
parently a settled reserve, move from one country 
to another is that in the highly developed state of 
the foreign exchange business, balances are con- 
tinually being transferred to the points where they 
can be most advantageously used. As long as ex- 
change on the point to which the transfer is to 
be made can be bought, that will be the form of 
remittance. When, however, exchange cannot be 
had, gold will be sent, and so it appears that the 
more balances transferred, the greater is apt to be 
the circulation of gold. 

The importing of gold does not necessarily mean 
"good times' 1 nor even "lower money rates," nor the 
exporting, the approach of a crisis; nevertheless im- 
portant deductions may be made if monthly figures 
are systematically collected and tabulated thereon. 
These deductions have been summarized by Burton as 
follows: 

"Every country will, under normal conditions, 
have a certain share of the gold or primary supply 
of the world. The different countries have been 
compared to reservoirs of water, of various sizes, 



284 BUSINESS BAROMETERS 

connected by pipes. All the reservoirs will main- 
tain the same level. The share of each country is 
determined primarily by its wealth. There is a 
tendency for metallic money, which is a form of 
wealth, to maintain in every country a fixed pro- 
portion to other forms of wealth. But the share 
of each is affected by the volume of its trade and 
other incidental circumstances, among which are 
established methods of transacting business, the 
habits of its people, and, notably, its currency sys- 
tem. The currency system affects the gold supply. 
Paper money displaces gold, and causes it to be 
sent elsewhere in a less or greater proportion, ac- 
cording as it is absolutely based upon a deposit of 
gold, is redeemable in gold on presentation, or is 
not redeemable at all. 

"Methods of transacting business influence the 
supply. Where balances are largely settled at 
clearing houses, and checks generally employed, less 
currency and less gold are required. In this par- 
ticular, the contrast between England and France 
is very marked. The latter country makes less use 
of clearing houses and checks and accordingly re- 
quires a larger supply of gold and silver, the latter 
metal being extensively used. 

"The habits of the people exercise an important 
influence. After the Franco-Prussian War it was 
found that the French peasant proprietors had 
hoarded large sums of gold. In the great emer- 
gency created, these amounts were brought out and 
assisted in the payment of the indemnity. Fre- 
quently when native grandees in India die, it ap- 



GOLD MOVEMENTS 285 

pears that they have been accumulating a great 
stock of gold, much of it in the form of ornaments, 
which for years has been kept out of circulation. 
All this hoarding tends to increase the demand on 
the gold which is in circulation as money. The 
peasant, or grandee who hoards, causes so much of 
the world's capital to lie idle. The benefit accruing 
in time of crisis or emergency to countries in which 
quantities of gold are withheld from general 
circulation is obtained at the cost of diminished 
activity and volume of business under ordinary 
conditions. 

U M. Paul Le Roy Beaulieu quotes figures to 
show that France in 1885 had a circulation of me- 
tallic money amounting to 215 francs per capita; 
England and the United States had, respectively, 
86 and 68 francs per capita. Of course if the 
quantity of coin in circulation had been based upon 
per capita wealth at the time, England would have 
shown the largest quantity per capita, France next 
and the United States last. 

"There is then a normal share of gold which be- 
longs to each country. If any country has more 
than its share, it will export. It is easy to 
recognize that from a gold producing country, 
such as Australia, South Africa or Alaska, the 
greater part of the gold mined will be exported. 
Likewise, if gold is held in any one country 
in such quantity that it can be invested elsewhere 
more advantageously, either in loans or in pur- 
chases, or can be sent abroad in payment of 
debts, it will be exported. If it is invested in 



286 BUSINESS BAROMETERS 

loans abroad, it is an indication of surplus capital 
and makes a favorable showing. If invested in 
purchases at low prices, it shows ability to draw 
upon other countries for an increasing share of ob- 
jects of utility. If the purchases show that home 
prices are higher than foreign, and a supply of 
things usually obtained at home must be obtained 
abroad, the export of gold is a sign of danger. Thus 
an important question in determining the shipments 
of gold, is the nature of the purchases or invest- 
ments to be made with it. 

"The specie exports and imports of this country 
have furnished distinct indications prior to each 
period of disturbance, but their signifiance cannot 
be understood without an examination not only of 
our general situation, but also of the particular 
situation at different times. Of the various cir- 
cumstances under which excess of exports of gold 
indicate the approach of a crisis, may be mentioned 
the following: 

"First, when gold is required for purchases abroad 
which are made at high and rising prices. This 
indicates overaction and concurs with unusual in- 
crease in the prices of domestic supplies. Espe- 
cially is this true if, in a time of rising prices, gold 
is exported for commodities usually supplied by do- 
mestic production. Such a condition cannot long 
continue without a reaction and an ensuing de- 
pression. The indications which are significant in 
connection with the imports of merchandise apply 
to the exports of gold. On the other hand, the ex- 
port of gold for purchases, when prices are low, is 



GOLD MOVEMENTS 287 

not an unfavorable condition. It indicates pur- 
chases upon advantageous terms. 

"Secondly, when the export of gold is attended by 
a scarcity of money and a marked increase in the 
rate of discount, it is a decidedly unfavorable indi- 
cation. This is of the same kind as those indica- 
tions noticed in the conditions of banks. A steady 
increase in the rate of discount, or a decrease in the 
supply of gold, is a sure precursor of a crisis. The 
only question is how long this condition can con- 
tinue without a crash. 

"Thirdly, an unusual balance of exports of gold, 
not explained by surplus production, continued for 
a considerable time, or a sudden withdrawal of large 
amounts is one of the most unfavorable conditions. 
It is to be noted that there is an exceptional sensi- 
tiveness in financial centres on the subject of gold 
exports, and sometimes an entirely normal export 
is interpreted as meaning instability, and destroys 
confidence when there is no need for distrust." 

It should be added that, when for a succession 
of years gold is withdrawn from circulation by rea- 
son of the substitution of inconvertible paper as 
money, the conditions which exist are sure to vary 
from normal lines. Credit will rest upon a false 
basis and the inevitable tendency will be towards an 
increase in the quantity of paper money outstand- 
ing and a dangerous expansion of credit. 

In many respects the phenomena of a balance of 
gold exports are similar to those arising from a bal- 
ance of merchandise imports. The two are ex- 
pected to appear contemporaneously, but in essen- 



288 BUSINESS BAROMETERS 

tial particulars they are different. Some differ- 
ences depend upon the question of gold production. 
In countries like South Africa and a portion of 
Australia, where gold mining is the leading indus- 
try, gold exports are naturally classed with mer- 
chandise exports, and an export is a favorable indi- 
cation. In non-producing countries like England 
and France, where gold is in demand principally as 
money, imports are a favorable indication. There 
is another difference in a noticeable tendency to- 
wards contemporaneous decline in gold reserves in 
all thje great financial centres. That which is lost 
in one country is not gained in another. This de- 
cline is explained by the withdrawal of considerable 
amounts to be hoarded or retained in circulation 
outside of the banks; and, to some extent, to the 
transfer of gold to the countries outside of the most 
advanced industrial and commercial circle. The 
influences which cause gold to be hoarded or re- 
tained in circulation outside of the banks are not 
unlike those which affect the circulation of paper 
money. International credits or payments fre- 
quently cause an excess of gold imports in a coun- 
try to coincide with an excess of imports of mer- 
chandise. Again, a large demand for money, mani- 
festing itself in high rates of interest, may cause 
gold to be retained in a country contemporaneously 
with an unusual balance of imports. 

For these reasons bankers and merchants sys- 
tematically collect and tabulate monthly figures on 
"Gold Movements." This, moreover, has recently 
been done more than ever before and panics are 



GOLD MOVEMENTS 289 

now actually "stayed off" for a year or more by the 
artificial importing of gold by the banks of the af- 
fected country. "For banks to import gold it is 
necessary to create a credit on the books of a bank, 
upon which the gold importer may draw, through 
the Clearing House, in payment of the cable trans- 
fers and bills of exchange necessary to cover the 
amount of gold to be brought over. Clearing 
House Loan Certificates enable the banks to make 
these credits, and that is the reason we were able to 
import such a large volume of gold during 1906—7. 
The banks extended their facilities to the importers, 
who brought over the gold on 'Trust Receipts,' 
which were deposited with the banks as collateral 
security pending the arrival of the gold." 

These issues of Clearing House Loan Certifi- 
cates also provided credit with which the banks 
were enabled to buy and pay for large amounts of 
the Panama bonds and United States Certificates 
of indebtedness, which were issued by the Govern- 
ment as a measure of relief. The bonds and cer- 
tificates so purchased were then placed on deposit 
in Washington as security for the new national 
bank note circulation. Under the present laws, 
and according to the provisions of the Aldrich Bill, 
so called, it is imperative that the banks should 
first buy bonds, send them on to Washington, and 
wait for its preparation before they can receive 
the new circulation. The credit to purchase these 
bonds in times of panic must be obtained in some 
way, as there would be no sense in paying our 
reserve money to buy bonds for circulation, and 



290 BUSINESS BAROMETERS 

receive no return on the same for a week or ten 
days, and then only in national bank notes, which 
cannot be counted as reserve. 

The following conclusions are suggested relative 
to "Gold Movements": 

As large or long continued gold exports* are al- 
ways unfavorable signs and gold imports are always 
favorable signs, the following suggestions refer es- 
pecially to exports. 
1. During a Period of Business Depression. 

(a) An increase in gold exports forecasts an 
increase in money rates; but sometimes signifies 
an improvement. 

(b) A decrease forecasts lower money rates 
but usually signifies no improvement. 

♦"America's supply available for export is derived almost entirely from 

Australia and Africa, and is usually absorbed by the following countries: 

Aver. Yearly -rFor 5 yrs. Aver. Annual 

Net Imports 

France *$75,800,300 

Germany *47,251,800 

United States 26,622,700 

Great Britain 18,597,300 

Argentina 16,698,400 

Egypt * 14,011,100 

Switzerland *13, 574,700 

Italy *12, 383,000 

Holland *4,417,400 

♦Estimates of British statistical abstracts. 

fThe latest five-year period for which returns are available. 

Perhaps the most striking feature is that while the United States is the 
only one of these nations which produces considerable gold, yet we draw 
more heavily on the international supply than any other country except 
France and Germany; and our imports of gold usually result automatically 
from our large export balance of merchandise. The French absorption 
represents, in part, a measure for national defense, and in part interest 
payments on enormous French investments. 

German demands results chiefly from its industrial expansion, with 
proportionate increase in demand for loans and currency. British imports 
during the five years were greater than usual, but there has been no material 
gain in either the gold reserves of British banks or the stocks of gold in use 
as money. The Argentine demand arises from the exceptionally rapid 
growth of Argentina's commerce and agriculture. 

Demands from all these countries arise from pretty constant and well 
defined causes, and there is little prospect of any material change in the 
world's current of gold." 



iding with 
1905 
1905 
1908 
1907 
1905 
1905 


Production 

$502,400 

66,600 

90,435,700 

29,200 

103,000 


1905 




1905 
1905 


39,600 



GOLD MOVEMENTS 291 

(c) No change is unfavorable or favorable 
according to whether gold is being exported or im- 
ported. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase forecasts an increase in money 
rates but usually signifies an improvement. 

(b) A decrease signifies continued improve- 
ment and forecasts lower money rates. 

(c) No change unfavorable or favorable, ac- 
cording to whether gold is being exported or im- 
ported. 

3. During a Period of Prosperity. 

(a) An increase signifies no improvement and, 
if continued over a long period, often foretells the 
end of the period of prosperity. 

(b) A decrease signifies continued improve- 
ment, but any exportation of gold should be con- 
sidered as unfavorable. 

(c) No change calls for caution. 

4. During a Period of Decline Following a Period 

of Prosperity. 

(a) An increase signifies no improvement and 
often calls for caution. 

(b) A decrease is the normal result of a de- 
crease in activity. 

(c) No change is unfavorable or favorable 
according to whether gold is being exported or im- 
ported. 



292 BUSINESS BAROMETERS 

FOREIGN MONEY RATES AND FOREIGN 
EXCHANGE. 

These two subjects are usually discussed to- 
gether, first because they are co-related and second- 
ly, because the subject of foreign money rates of 
itself is not sufficiently important to be treated in- 
dependently. All that need be said as regards 
foreign money rates is that money, like water, seeks 
its own level, unless artificially held or .forced. 
Therefore, if money rates are low in the United 
States, but for some time have been high in Eng- 
land, Germany or France, money rates in the United 
States are sure to increase soon, the increase to 
be followed possibly by a period of stringency. 
There are two reasons for this: first, the loans to 
American bankers by foreign bankers will be called 
for payment, or else the foreign rate will so be 
raised that it will be more profitable for the Ameri- 
cans to borrow at home; and secondly, foreign bank- 
ers will begin to borrow from America and thus take 
advantage of the lower American rates. As both of 
these causes are in operation at the same time, the 
rates very soon equalize, the foreign rates declining 
and the American rates increasing. The converse 
of this principle is also true. When the money 
rates in America are high, but the foreign rates 
have been low for some months, the tendency is for 
the American rates to decline and the foreign rates 
to advance. 

When tabulating foreign rates, investors and mer- 
chants consider only the u rate of discount" of the three 
leading foreign banks; namely, the Bank of England 



FOREIGN MONEY RATES 



293 



the Bank of France and the Bank of Germany. The 
tabulation and the interpretation of these rates is very 
simple, especially as the three rates are usually added 
and averaged, thus necessitating the use of only one 
table. The American merchant always keeps in 
mind, however, that low foreign money rates have 
their disadvantages as well as their advantages, as 
very often they signify a low condition of foreign 
trade, which, during certain periods, may be spread 
to America. 

The changes in the Bank of England rate in re- 
cent years have been as follows: 



Sept. 


21, 


1911 4 


Mar. 


9, 


1911 3 


Feb. 


16, 


1911 3i 


Jan. 


26, 


1911 4 


Dec. 


1, 


1910 4i 


Oct. 


20, 


1910 5 


Sept. 


29 


1910 4 


June 


9, 


1910 3 


June 


2, 


1910 3J 


Mar. 


17, 


1910 4 


Feb. 


10, 


1910 3 


Jan. 


20, 


1910 3£ 


Jan. 


6, 


1910 4 



Dec. 


9 


1909 4* 


Oct. 


21, 


1909 5 


Oct. 


14 


1909 4 


Oct. 


7 


1909 3 


April 


1 


1909 2\ 


Jan. 


14 


1909 3 


May 


28 


1908 2\ 


Mar. 


19, 


1908 3 


Mar. 


5, 


1908 3J 


Jan. 


23, 


1908 4 


Jan. 


16, 


1908 5 


Jan. 


2, 


1908 6 


Nov. 


7, 


1907 7 



Nov. 


4,1907 6 


Sept 


7,1905 3 


Oct. 


31,1907 5J 


Mar. 


9,1905 1\ 


Aug. 


15, 1907 \\ 


Apr. 


21, 1904 3 


Apr. 


25, 1907 4 


Apr. 


14, 1904 Z\ 


Apr. 


11, 1907 4§ 


Sept. 


3, 1903 4 


Jan. 


17, 1907 5 


June 


18, 1903 3 


Oct. 


19, 1906 6 


May 


24, 1903 2>\ 


Oct. 


11, 1906 5 


Oct. 


31, 1902 4 


Sept. 


13, 1906 4 


Oct. 


2, 1902 4 


June 


21,1906 3 J 


Feb. 


3, 1902 3 


May 


3, 1906 4 


Jan. 


23, 1902 3i 


Apr. 


5, 1905 3i 


June 


13, 1901 3 


Sept. 


28, 1905 4 


June 


6, 1901 3i 



Foreign money rates, as affecting American 
money rates through the transferring of gold, are 
affected only by the purchase and sale of foreign 
exchange. Therefore, although merchants usually 
study only foreign money rates with their common 
knowledge of foreign exchange, yet theoretically, 
a study of foreign exchange will in itself suffice. 

Foreign is quoted both as to "actual rates" and 
as to "quoted rates." For a general description 
of these headings we quote Howard Irving Smith 
as follows : 

"The quotation 'actual rate' means the rate at 
which exchange is sold in large amounts by the deal- 
er; the quotation 'posted rate' means the prelimi- 



294 BUSINESS BAROMETERS 

nary asking rate of the day before an actual rate is 
made, and this is the rate usually exacted for a small 
amount of exchange by a dealer. The actual and 
posted rates are the rates at which dealers sell bills 
of exchange issued by themselves. They do not, as 
a rule, announce the rates at which they will buy 
commercial bills of exchange; that is a matter of 
negotiation and depends on the nature of the bills. 
The newspapers, however, publish approximate 
prices for commercial bills. 

"Foreign exchange is payable in the money of the 
country upon which the exchange is drawn, that is, 
where the exchange is payable. The equivalent of 
$1.00 in English money is 49.3 pence or four shil- 
lings 1 . 3 pence. When foreign exchange is quoted 
in the money of the country where it is bought, the 
unit of the money of the country where payable is 
figured at so much money of the country where the 
bill is issued. Thus, when sterling exchange is 
quoted at $4.8665, £1 in exchange is worth $4.8665. 

"When foreign exchange is quoted in money of 
the country where it is payable (not where it is 
bought), the unit of money of the country where it 
is bought is figured at so much in the money of the 
country where the bill is payable. Thus, when ex- 
change on France is quoted at 18 (5 francs, 18 cen- 
times), $1.00 in exchange is worth 5.18 francs. 

"When a bill of exchange is quoted in the money 
of the country in which it is issued, but is payable 
(is to be paid) in the money of the country upon 
which it is drawn (where it is payable), the higher 
the quotation, or rate, the higher is the cost of such 



FOREIGN MONEY RATES 295 

exchange, for the reason that a high rate requires 
more of the money of the country where the bill is 
purchased, to buy a given amount of the money of 
the country where the bill is payable than a low 
rate requires. 

"On the other hand, when a bill of exchange is 
quoted in the money of the country upon which it 
is drawn (which is also the money in which it is to 
be paid), as francs, the higher the quotation the less 
the cost of such exchange, for the reason that more 
(in the foreign country's money) can be purchased 
for $1.00 at a high rate than can be purchased at 
a low rate. 

"Illustration: If exchange for £1 is purchased 
for $4.89 it costs more than if purchased at $4.84. 
On the other hand, if exchange for 25 francs (5 
francs, 25 centimes) is purchased for $1.00 it costs 
less than if $1.00 is paid for 511 francs; or, putting 
it the other way, $1.00 buys more in francs at the 
high rate than it does at the low rate. 

"The amount paid for a time bill depends on the 
length of time it is to run and the rate of interest 
prevailing in the country where the bill is payable. 
A commercial bill payable in London three months 
after date is bought by a dealer in exchange in New 
York at a price which is equal to a bill payable on 
demand, less than three months' interest at the ex- 
isting rate of interest in London. The London rate 
of interest serves as the basis in calculating the 
price of the bill, for the reason that the bill is payable 
in London and to make it equal to a draft payable 
on demand it must be discounted in London. 



296 BUSINESS BAROMETERS 

"High cost for exchange ordinarily means that 
the international balance is against the country 
where the high cost prevails; conversely, low cost 
for exchange ordinarily means that the international 
balance is in favor of the country where the low cost 
prevails. ' ' However, as all of this may be ascertained 
by a study of foreign money rates and other tables 
already mentioned, it is unnecessary for the merchant 
to collect or tabulate figures on foreign exchange. 

The fact is that, so far from financial panics 
being confined to the United States in 1907, a really 
formidable credit crisis occurred that year in at 
least four foreign cities situated in four separate 
continents, two of these markets being wholly un- 
connected in a financial way with the United States 
and the financial collapse occurring in two of them 
before the panic broke out in our country in Oc- 
tober, 1907. As early as May, 1907, bank failures, 
hoarding of money and very general suspension of 
credit facilities were witnessed in Egypt, and Lon- 
don was hurrying along emergency shipments of 
gold to Alexandria, exactly as it hurried along the 
gold shipments to New York about six months 
later. At nearly the same time bank failures and 
panicky conditions on the markets were happening 
in Japan. In almost every week of our own Octo- 
ber crisis, and on yet another continent, the pow- 
erful Banco Mobiliario of Valparaiso suspended pay- 
ments, credit came to a halt in Chile, the currency 
sank to a low level of depreciation, and the Chilian 
Government was forced to take measures of relief. 
Again almost simultaneously with our own crisis, 



FOREIGN MONEY RATES 297 

panic broke out in Hamburg, Germany, carrying 
down two great commercial houses, and leading 
German financial experts pronounced the crisis the 
worst Hamburg had witnessed since 1857. 

One hardly needs add to this list such other minor 
crises as the temporary breakdown in credit in 
Genoa in the middle of 1907, and the panic at Co- 
penhagen, a few months after our own, which com- 
pelled the Danish Government to come to the res- 
cue by guaranteeing the assets of banks then sub- 
ject to a run by depositors. What this part of the 
history of 1907 conclusively proves is that financiers 
and historians must look elsewhere than to Ameri- 
can legislation and American banking for causes of 
that year's panic. European economic experts have 
not found it difficult to assign the cause; it was in- 
deed pointed out by the eminent Paris economist, 
M. Leroy Beaulieu, even before the panic came. 

"That cause was the exhaustion, in a violent 
world-wide industrial expansion and an even more 
world-wide speculation, of the world's accruing 
capital resources, and a consequent strain on credit 
which, throughout the financial world, approached 
the breaking point. With such a tension in the 
international chain of credit, the break was bound 
to come, either where the link was weakest or 
where the strain was greatest. The link was 
weakest in Chile and Egypt while the strain was 
incalculably the greatest in the United States, 
where speculation of an unheard of rashness and 
magnitude had been raging for two years. The 
severity of the shock in all these localities, and the 



298 BUSINESS BAROMETERS 

world-wide liquidation and reaction, in both finance 
and commerce which have followed and which still 
prevail, in Europe, Asia, Africa and South America, 
as well as in this country, were the logical and inev- 
itable outcome." Therefore the necessity of study- 
ing foreign conditions and not simply conditions in 
only one country, is apparent. 

The following conclusions are suggested relative 
to "Foreign Money Rates,"* as expressive in figures 
of foreign conditions. 

1 . During a Period of Business Depression. 

(a) An increase in foreign money rates usually 
signifies higher domestic rates. 

(b) A decrease signifies no improvement. 

(c) No change signifies "no change." 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase in foreign money rates or in 
foreign exchange usually forecasts higher domestic 
money rates, and may signify further improvement. 

(b) A decrease often signifies no improvement. 

(c) No change signifies normal conditions. 

3 . During a Period of Prosperity. 

(a) An increase in foreign money rates or in 
foreign exchange usually forecasts higher domestic 
rates, and signifies no improvement. 

(b) A decrease signifies continued improve- 
ment. 

(c) No change means normal conditions. 

♦These figures are also of special value in judging the course of domestic 
rates. 



PRODUCTION OF GOLD 299 

4. During a Period of Decline Following a Period 
of Prosperity. 

(a) An increase in foreign money rates or in 
foreign exchange usually forecasts higher domestic 
money rates, and no improvement. 

(b) A decrease signifies the reverse, providing 
all other factors remain constant. 

(c) No change signifies normal conditions. 

PRODUCTION OF GOLD 

As to the effect of the production of gold, there is 
a diversity of opinion. That it is a subject of great 
importance when a long period of years is con- 
sidered is admitted by all ; but many deny that it is 
of such importance when considering a period of 
only a few years. The theory that as the supply of 
gold (which is used as a standard of value and a me- 
dium of exchange) increases, interest rates and 
commodity prices must immediately increase, is 
actively combated by many authorities. If there 
were no other possible causes at work affecting 
interest rates and commodity prices, this theory 
would be taken more seriously, especially as it 
would involve a general decline in bonds and all 
fixed interest obligations; but even then it would be 
obliged to stand the test of experience. 

The editor of the Engineering and Mining Journal 
Mr. Walter R. Ingalls, claims to have shown by 
statistics and graphic diagrams, that there has been 
no correspondence between the fluctuations in the 
gold supply and those in prices. Going back to the 



300 BUSINESS BAROMETERS 

time of the first notable modern increase in gold 
production, he showed that for some years, beginning 
with 1851, there was an apparent parallelism, but 
there was a drop in prices after the crisis of 1857, 
and then a recovery and increase until 1864, though 
the production of gold was then falling off. After 
that prices declined until 1870, while the gold sup- 
ply fluctuated within narrow limits; but in 1871 
prices started up again, with gold production de- 
clining. During the fall in prices after 1873, there 
was an upward turn in the production of gold and 
by a peculiar perversity, in view of any theory of 
cause and effect, it fell off again after 1879 as prices 
began to rise. The decline in gold production con- 
tinued until 1883 when there was another upward 
turn followed by a continued increase until 1896. 
The output was then more than double that of 1884 
and the highest ever reached before that time; but 
during that period there was an almost continual 
decline in commodity prices, to contrast with the 
rise which took place, while the annual supply of 
new gold again doubled. This may not prove that 
the increased production of gold has had no effect 
upon its commercial value compared with the 
general mass of commodities, and consequently 
upon prices determined by its value as the standard 
of measurement and computation, but it does 
very conclusively refute the theory that the two 
things stand in the closest relation of cause and 
effect. There is certainly no close correspondence 
between them from year to year and the inevitable 
inference is that much more potent causes, than the 



PRODUCTION OF GOLD 301 

volume of gold in monetary use, are at work in 
determining the course of prices. 

It is a question whether the demand for the use of 
gold as a basis of credit and exchange has not kept 
pace with the supply and prevented any absolute 
depreciation. Mr. Ingalls forcibly opposes the 
argument that the cost to capital and labor of pro- 
ducing gold has diminished and that available de- 
posits are on the increase, with cheapening methods 
of extraction. In connection with the question of 
increased demand, he took the increasing produc- 
tion of pig-iron as fairly representing the advance 
made in industries and trade generally and showed 
both by figures and graphic diagrams that its in- 
crease has been relatively greater than that of gold. 

The general subject of gold has best been pre- 
sented in a book entitled "The Story of Gold" by 
Professor E. S. Meade; while the theory that the 
rise in commodity prices is due to the increased 
production of the metal is well described in the book 
entitled "Gold Supply and Prosperity," edited by 
Byron W. Holt of New York City, who is generally 
recognized as one of the best informed men on this 
subject. Based upon the assumption that the out- 
put of gold is to increase for the next ten years at 
an average rate of not less than 5%, Mr. Holt 
arrives at the following fourteen conclusions: — 

"(1). That the value of gold will depreciate as 
the quantity increases, though not, perhaps, at the 
same ratio. 

(2). That this depreciation will be measured by 
the rise in the average price level. 



302 BUSINESS BAROMETERS 

(3). That rising prices will soon lead again to 
rising and higher interest rates. 

(4). That, because of high interest rates, the 
prices of bonds and most other long-time obliga- 
tions drawing fixed rates of interest, dividends or 
income will again decline to low levels. 

(5). That, because of rising prices and high in- 
terest rates, the cost of materials and supplies will 
tend to decrease the net profits of all concerns the 
price of whose products or services either cannot be 
advanced at all or are not free to advance rapidly. 

(6). That, because of rising prices, the net 
profits of all concerns that own their own sources of 
materials and supplies will tend to increase. 

(7). That, because of rising prices of commodi- 
ties, the market prices of all tangible property will 
tend to rise. This includes lands, forests, mines, 
buildings and improvements. 

(8). That, because of rising prices of com- 
modities and property, the prices of the stocks of 
corporations holding commodities or property will 
tend to advance. 

(9) That, because of rising prices and there- 
fore of cost of living, wages must and will, tend to 
advance. 

(10). That, because wages and salaries will not 
rise as much or as fast as will prices and the cost of 
living, there will be dissatisfaction and unrest 
among wage and salary earners. 

(1 1) . That, because of rising prices and property, 
there will be much speculation in commodites, 
stocks and real estate. 



PRODUCTION OF GOLD 303 

(12) . That, because of the great profits that will 
result from speculation, honest industry will be 
discouraged and recklessness and extravagance 
will be encouraged. 

(13). That, because rising prices will decrease 
the purchasing power of debts, and thus aid debtors 
at the expense of creditors, they will discourage 
saving and thrift. 

(14). That, then, an increasing output of gold 
means rising prices, rising wages, high interest 
rates, the scaling of debts, speculation, unjust 
distribution of earnings and wealth and general 
dissatisfaction and discontent." 

These conclusions seem to follow each other 
logically, though their close connection is not 
wholly evident. The first two conclusions, being 
the more fundamental and important, Mr. Holt 
discusses as follows: 

"It is almost inconceivable that an increasing 
supply and output of gold, the standard and meas- 
ure of values, will not tend to raise prices. It is 
not asserted that a slight increase in the supply will 
cause prices to advance. The natural course of 
prices, especially of manufactured goods, is down- 
wards. To offset this cheapening tendency, due 
to invention and improvement, an increase of 
perhaps 2% a year in the supply of gold may be 
necessary. To offset the growing demand for gold, 
due to industrial expansion, an increase of perhaps 
1% more a year may be necessary. 

"An increase of perhaps 3% a year in the world's 
volume of gold, then, may be necessary to maintain 



304 BUSINESS BAROMETERS 

stable prices. This being true, a smaller increase 
than 3% will result in declining prices, and a greater 
increase will result in advancing prices of commodi- 
ties. An increase of 5% a year in the supply of 
gold then would cause prices to rise an average of 
2% a year, and an increase of 8% in the supply 
of gold would cause prices to rise an average of 5% 
a year." 

As to whether Mr. Holt or Mr. Ingalls is correct, 
the reader must decide for himself. It is very 
generally admitted that a sudden increase in the 
supply of gold at certain times gives impetus to 
business activity, results in the conception of new 
ventures and indirectly is accompanied by an ad- 
vance in prices. This rising movement in prices of 
itself encourages speculation and the extension of 
credit to a dangerous degree. Large profits lead to 
waste and extravagance, which conditions are fol- 
lowed by a crisis and a period of depression. There- 
fore it seems reasonable to admit that the over- 
production of gold is one factor causing increased 
prices, thus indirectly affecting business conditions; 
but it is very illogical to point to the production of 
gold as the only factor or even as the most important 
factor affecting prices and interest rates. The in- 
crease in population, the destruction of natural re- 
sources, industrial combinations, labor unions, in- 
creased cost of agricultural lands and. many other 
factors tend to increase the prices of commodities, 
rates of interest and investment values. 

Nevertheless, "Gold Production 11 is an important 
subject, and it is the practice of most careful bankers, 



PRODUCTION OF GOLD 305 

manufacturers and merchants regularly to tabulate 
the monthly production of the Rand mines as an 
index of the world's production. Of this production 
it is said: "Treatment of ore in Johannesburg 
continues seven days a week, and February, with 28 
days, is always a small month; while, other things 
being equal, a month with 31 days will have a bigger 
output than a month with 30 days. December 
is subject to special conditions, because there is a 
general clean-up at the end of the year, which 
always makes that month larger than others. 

Month after month since the Boer War, the 
Rand output increased uniformly, with no check 
other than variation in length of month. A check 
to such an advance which has extended over five 
years or more would be very important. There are, 
of course, other centers of gold production like 
Alaska, whose wealth is said to be incalculable; but 
a real reduction in the Transvaal would be a 
practical fact as against a theory. 

Reduction in the world's gold production at 
this time might not be felt for months, but it might 
mean ultimately a reduction in price of all commod- 
ities not artificially supported; an advance in price 
of bonds; a reduction in rate of interest on 
mortgages; lower wages in view of the consequent 
greater purchasing power of gold; and a decline in 
price of stocks caused by the transference of 
investments from stocks to bonds. This last 
development might occur because of the great 
purchasing power of interest on^bonds/ the^collapse 
of any inflation movement in stocks, and the 



306 BUSINESS BAROMETERS 

investor's preference for a safe investment. The 
following conclusions are suggested relative to 
"Gold Production:"* 

1. During a Period of Business Depression. 

(a) A great increase tends at first to lower 
money rates, and may cause an improvement. 

(b) A great decrease tends to increase money 
rates, and may signify no immediate improvement. 

(c) No change signifies that money rates will 
be determined wholly by outside conditions. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) A great increase tends at first to lower 
money rates (although the later effect may be the 
reverse) and signifies continued improvement. 

(b) A great decrease tends to increase money 
rates, and signifies no improvement. 

(c) No change signifies that money rates will 
be determined wholly by outside conditions. 

3. During a Period of Prosperity. 

(a) A great increase is very dangerous and 
calls for caution. 

(b) A great decrease tends to upset condi- 
tions and also calls for caution. 

(c) No change signifies that money rates will 
be determined wholly by outside conditions. 

4. During a Period of Decline Following a Period 

of Prosperity. 

*These figures have an immediate bearing on all money rates and a 
distant bearing upon the price of all commodities including money. 



COMMODITY PRICES 307 

(a) A great increase tends to retard the re- 
adjustment. 

(b) A great decrease tends to hasten the re- 
adjustment. 

(c) No change signifies that money rates will 
be determined wholly by outside conditions. 

COMMODITY PRICES. 

One cannot do better, when studying this subject, 
than to refer to Hon. Theodore E. Burton's book 
entitled "Crises and Depressions," in which, among 
other things, he states : — 

"In the season of activity, which precedes a crisis, 
prices rise. This rise begins after the worst of the 
previous depression has been reached. Attention 
has already been called to the fact that the rise in 
prices is unequal in different commodities. Iron 
and steel in their various forms, as well as other 
commodities required for construction, and those 
which supply new demands for consumption, show 
the most striking increases. During a depression, 
prices of these commodities fall first and most 
notably. The prices of other commodities do not 
fall so much or so early. In the preceding season 
of expansion they do not rise so much, and, in their 
rise as well as in their fall, they show, for the most 
part, only a remote effect of the activity or in- 
activity of the time. 

"As is well known, it is the tendency of prices of 
iron and steel to reach and pass their maximum some 
time before the crisis occurs, though if the crisis be 
precipitated by an unexpected failure, the interval 



308 BUSINESS BAROMETERS 

will be short or the high prices may continue until 
the very outbreak of the crisis.* 

"In the United States, prior to the crisis of 
September 18, 1873, a low price level appeared in 
almost all grades of iron and steel in January 1871. 
This was followed by a rapid and almost unbroken 
rise, culminating in the months of October and 
November 1872. A maximum price of rolled bar 
iron, $118.72 at Philadelphia, was reached in Octo- 
ber 1872. The price fell, with slight fluctuations, 
to $80.64 in September 1873, the month of the crisis. 

"In the depression which followed the crisis of 
1873, prices of a majority of the varieties of iron and 
steel were lowest in the latter part of the year 1878, 
though steel rails and standard sections of iron rails 
dropped to a minimum in the closing months of 
1877. The month of November 1878 may, how- 
ever, be selected as the turning point. At that date 
No. 1 anthracite foundry pig-iron was only $16.50 
per gross ton, less than one-third the price of 
September 1872. 

"In the expansion which followed 1878, prices 
reached their maximum in the months of January, 
February and March, 1880; but the highest figures 
were maintained only for a very short time. An- 
thracite foundry pig-iron, which had fallen to 
$16.50 in November 1878, rose to $41.00 in Febru- 
ary, 1880; rolled bar iron to $85.12 in the same 
month; steel rails to $85 ; cut nails to $5.25 in the 

*This is why the price of iron is tabulated each month — as a barometer 
for forecasting changes in general business; although — as will be seen from 
a chart in the earlier part of this book— commodity prices do not reach a 
minimum until one or two years after the stock market reaches its low 
point. 



COMMODITY PRICES 309 

months of February and March. After the month 
of March, 1880, there was a sharp decline. Al- 
though interrupted by numerous fluctuations, a 
steady decline began after the closing months of the 
year 1882, and continued until another minimum 
was reached in the summer of 1885. The crisis of 
May 1884 occurred in the midst of this downward 
movement and seems to have exerted but little in- 
fluence upon the iron market. Anthracite foundry 
pig-iron fell to $17.75 in the months of June, July 
and August of 1885 and then began to rise. 
Rolled bar iron fell to $40.30 in May of the same 
year, and then was quoted at $40.32 for the re- 
maining months of the year. Steel rails fell to $26 
in the month of April. 

"After the minimum point in 1885 there was an 
upward movement continuing until the early months 
of 1887, the months of February and March of that 
year showing maximum prices in most varieties of 
iron and steel; this maximum was succeeded by a 
fall in the prices, which for most varieties reached a 
minimum in May and June 1889. This minimum 
was followed for a short time by rising prices, 
which reached a maximum in 1890. In the two dec- 
ades after the maximum prices of 1880 the trend of 
prices differed from that in the preceding decade. 
Fluctuations were much more frequent and for 
nearly eighteen years the general tendency was 
downward, though interrupted by brief revivals in 
prices in the years 1882, 1886, 1887, 1890 and 1895. 
The rise in price which occurred in 1887 and other 
years proved to be greater than the increase de- 



310 BUSINESS BAROMETERS 

mand would sustain. The general statement may 
be made that during this long period between 1880 
and 1897, in fact until 1898 for there was only a 
slight rise in that year and the average price of 
several forms was less than in 1897, the demand 
did not keep pace with the increasing supply, and 
improvements in production were constantly exert- 
ing their influence. The increase in price in the 
United States in 1887 was greater than in other 
countries. The reason for the difference may be 
found in the exceptional demands in the year 1887, 
for in that year occurred the most extensive railway 
building and the greatest consumption of steel 
rails. There was an exceptional deficiency in the 
home supply. There was also a revival of general 
activity in this country, the effect of which was con- 
spicuous. It should be further noted that the 
crisis of this decade was much less severe than that 
of 1873, and the downward movement succeeding it, 
though long continued, manifested less decline in 
prices. 

After the high prices of 1890, there was a fall 
which continued until the month of July 1897. 
This fall was more uniform than those after 1880 
and 1887. It was interrupted only by a temporary 
revival beginning after April 1895, and continuing 
until the latter part of the year. Beginning in 
July 1897 prices show an upward tendency, but 
increases were slight until the beginning of 1899; 
then there was a very rapid rise until the latter part 
of the year, which continued, with the exception of 
a very slight setback in 1903, to the depression of 
1907-8. 



COMMODITY PRICES 311 

Again the improved conditions of 1909—10 were 
preceded by a remarkable increase in the price and 
production of iron, followed later by an increase in 
the production of copper and other commodi- 
ties. 

In the examination of these price movements 
several marked tendencies appear: 

"(1). The interval between the date of the maxi- 
mum prices and the succeeding crisis is longer in 
the later years. This interval continued for a few 
months prior to the crisis of 1825 and 1837, nearly 
a year prior to that of 1873, and several years prior 
to the crisis of 1884 and 1893. This longer interval 
may be explained by the greater ability to carry 
accumulated stocks in expectation of a rise, the 
larger influence of speculation, and the absorption 
whenever prices decline, of larger quantities by the 
market now existing. 

These influences explain another tendency, viz. : 

"(2). In later years fluctuations are more fre- 
quent. In the period after the downward price 
movement has commenced the market price breaks 
and then is restored again. It is evident that 
abundant capital for construction is waiting for 
investment and even in case of a slight decline, pur- 
chases are large and tend to bring prices to the 
former level. 

"(3). Since 1873 the maximum price reached in 
each cycle tends to be less than that in the preced- 
ing cycle. This is due to invention, to the lower cost 
of manufacturing on a large scale, and improve- 
ments of transportation. This tendency to lower 



312 BUSINESS BAROMETERS 

prices is a part of the progress of the time and an 
essential feature in each depression. 

11 (4) . The upward movement of prices continues 
for a much shorter time than the downward move- 
ment. The upward movement preceding the maxi- 
mum of October and November, 1872, continued for 
one year and nine months. The succeeding down- 
ward movement lasted until November 1878, or 
six years and one month. Then an upward move- 
ment continued until February, 1880, or one year 
and three months; the succeeding downward move- 
ment lasted approximately five and one half years, 
to the summer of 1885, to be followed by a rising 
movement interrupted in the United States in 1888 
and 1889, of four and one-half years, or until 
January 1890. It is to be noticed, however, that 
the rise in most grades of iron and steel for a year 
after the summer of 1885 was very slight. After 
January, 1890, the downward movement continued 
for seven and one half years, to July 1897, when 
prices for a year were almost stationary, to be fol- 
lowed by rising prices, which continued until the 
end of 1899 or less than a year and a half. 

"(5). The rapid rise which precedes a maximum 
price rarely continues for more than a year. If we 
take anthracite and Bessemer pig-iron as the best 
standard, it will be noticed that prior to the maxi- 
mum price of anthracite, September 1872, prices 
rose from $37 in January of that year; prior to the 
maximum of $41 in February 1880, prices had risen 
rapidly from $20.75 in August 1897, or for six 
months; prior to the maximum of $19.90 in January 



COMMODITY PRICES 313 

1890, there was a rise from $17 in May 1889, or for 
eight months; prior to the maximum of $25 for 
Bessemer pig-iron in December 1899, there was a 
rapid rise from $11 in January of the same year, or 
for eleven months. In many respects the rise in 
1899 was the most remarkable of all, because it had 
been considered by manufacturers in the preceding 
years that the equipment for production was suffi- 
cient to properly meet any increase of demand, and 
yet the rapid rise in that year was unprecedented. 
The great increase in the price of iron and steel in 
that year, with the steady increase in production 
after 1894, proves the more general use of these prod- 
ucts for a greater variety of purposes and over an 
enlarged area." 

For a general study of prices, bankers and mer- 
chants use Bradstreet's Index of American prices 
and the London Economist's Index of English 
prices, and tabulate or plot these at regular inter- 
vals. It will be noticed in studying commodity 
prices, that the fall after a year of panic, curtail- 
ment and depression is usually considerably less 
than the preceding rise. For this fact there are two 
explanations. 

One of these attributes the persistence of prices 
on high levels to the continuous output of gold 
which is now being supplied at a rate of more than 
a million dollars a day. The other explanation 
finds the causes for the effect in question due to 
several different influences which have character- 
ized the industrial and commercial world for fully 
a decade. It is well worth while setting over 



314 BUSINESS BAROMETERS 

against the single item of gold supply these other 
factors as part of the dynamics which have helped 
to lift the great plane of values to the level where it 
has with proper exceptions and limitations, per- 
sistently stood for the past several years. 

There are three at least, if not four substantial 
reasons why prices have risen so rapidly since the 
opening of this century and have been maintained 
so stubbornly. 

"First. The first factor is the enormous increase 

in the world's purchasing power arising from the 

annual increment of values in the output of mines, 

agriculture, forests and other extractive industries. 

It is figured conservatively that in the past ten 

years there has been taken out of the earth and the 

waters of the United States alone a sum of natural 

values amounting to $90,000,000,000, as follows: 

Mineral output (ten years) $14,000,000,000 

Agricultural products (ten years) 60,000,000,000 

Lumber products (ten years) 12,000,000,000 

Grazing, fishing, etc., (ten years) 4,000,000,000 

Total for decade in United States 90,000,000,000 

"Second. Another factor in maintaining high 
prices is the expansion in the geographical area 
of productive enterprise over new territories which 
during the last decade have for the first time been 
fairly incorporated into the world's market. With- 
in this period nearly the whole of Siberia has been 
added to the world's trading area, through the 
enormous outlay required to build the Trans-Si- 
beria Railroad. Every foot of this trans-continen- 
tal thoroughfare was accompanied by the creation 
of new demand for commodities, new capital for de- 



COMMODITY PRICES 315 

velopment and by the manifestation of new power 
to purchase. What was done in Siberia in an ex- 
tensive way has also been done in Japan, China, 
India, Egypt, Australia, Africa, South America, 
Mexico and Canada, since prices began their up- 
ward movement in 1897. The work of money, as 
well as the work of man and of his implements of 
production, has all been earning an increasing in- 
come, which almost immediately manifests itself 
in an expanding demand upon the industrial nations 
for their output. 

" Thirdly, the maintenance of high prices is prob- 
ably due to the rise of the standard of living which 
a decade of increasing wealth has first produced, 
and then established with a resisting power that 
even in times of depression resists with a new force 
any recession in its newly gained advantages. 

"Fourthly, there is a final factor behind existing 
price levels in the forms of the wastes of wars andin 
the millions of misdirected capital which have helped 
to enhance the costs of profitable production. The 
power behind high prices is not the uplift of gold 
but rather the aspiration of man, whether seen in 
the individual's impulse to gain income or in large- 
scale production to control markets. Gold as a 
dynamic element has its part, but as a measure of 
value it is a gauge rather than a cause." 

Therefore the price of commodities is one of the best 
of business barometers and all merchants and bankers 
systematically tabulate each month the "Index Num- 
ber" compiled by Bradstreet or others, supplemented 
with figures on the price of iron, copper, cotton, etc. 



316 BUSINESS BAROMETERS 

Such figures especially interest bankers since much 
more money is needed to finance a given volume 
of business with high prices than with low prices. 
Therefore, an increase in interest rates usually follows 
a decided advance in commodity prices. 

The following conclusions are suggested relative 
to "Commodity Prices." 

1 . During a Period of Business Depression. 

(a) An increase in commodity prices during a 
period of depression, after a period of low commodity 
prices, signifies that the depression has come to an 
end and improvement has begun, provided such an 
increase has been preceded by a distinct decrease. 

(b) A decrease in commodity prices is normal 
and signifies no improvement. 

(c) No change calls for caution. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase following a decrease signifies 
continued improvement. 

(b) A decrease may signify that the period 
of improvement is progressing satisfactorily, or it 
may signify a temporary check. 

(c) No change calls for caution. 

3. During a Period of Prosperity. 

(a) A great increase in commodity prices 
signifies no further improvement, and often is one of 
the signs of the end of this period. 

(b) A decrease is very unusual and should be 
carefully investigated. 

(c) No change calls for caution. 



COxMMODITY PRICES 317 

4. During a Period of Decline Following a Period 
of Prosperity. 

(a) An increase is not unusual as commodity 
prices sometimes continue to increase about one 
year after the decline in stocks takes place. Such 
an increase, however, clearly signifies that no im- 
mediate improvement may be expected. 

(b) A decrease signifies that the period o^ 
decline is progressing satisfactorily and may fore- 
cast an improvement. 

(c) No change is normal at the beginning of 
this period. 

Students desiring a popular discussion of this 
subject are advised to read the report published 
by the State of Massachusetts on the "Increased 
Cost of Living" in May, 1910, — Robert Luce, Esq., 
60 State St., Boston, Chairman. 

The most scientific discussion of prices may, 
however, be found in Prof. Irving Fisher's new 
book, entitled "The Purchasing Power of Money" 
and published by Macmillan & Co., New York. 
Professor Fisher deserves the very highest commen- 
dation for his original researches along these lines, 
and all of his works deserve the most careful 
attention. 

NOTE. See page 248. 

— Trust Cos. — — State Banks — 

Reserve Required for Trust Total Of Total Of 

Companies and State Banks Reserve which Reserve which 

Location Required, in Cash. Required, in Cash 

Manhattan Borough 15% 15% 25% 15% 

Brooklyn Borough (without branches 

in Manhattan) 15% 10% 20% 10% 

Other Boroughs (without branches 

in Manhattan) 15% 10% 15% 1\% 

Brooklyn Borough, with branches in 

Manhattan 15% 15% 20% 20% 

Other Boroughs, with branches in 

Manhattan 15% 15% 15% 15% 

Elsewhere in State 10% 5% 15% 6% 

— The Commercial and Financial Chronicle 



CHAPTER VIII 

SUBJECTS RELATING ESPECIALLY TO INVEST- 
MENT CONDITIONS 

(For figures for years later than those herein given, see the large sheet 
contained in the Addenda.) 

STOCK EXCHANGE TRANSACTIONS 

THERE are three features in connection with 
the New York Stock Exchange which are 
of value in forecasting business conditions. 
They are as follows : 

1. The Quotations. 

2 . The Transactions . 

3. The New Securities Listed. . (See section 
entitled "New Securities," page 324.) 

QUOTATIONS 

When studying the quotations, only a long pe- 
riod of time showing the general tendency should be 
considered. The fluctuations from day to day are 
of no value whatever, nor are the swings covering 
only a period of a few weeks. A study of the 
general tendency of the market, however, is of con- 
siderable value in forecasting business conditions. 

If the highest point of each successive swing is 
higher than the high point of the preceding swing, 
and if the low point of each successive swing is 
not so low as that of the preceding swing, then 
the tendency of the market is upward. If the last 
high point and the last low point are lower than the 
high points and low points of earlier periods, then 
the tendency of the market is downward. 



STOCK EXCHANGE TRANSACTIONS 319 

In order to study this matter intelligently, a plot 
should be made of the average prices of the leading 
railroad and industrial stocks. The list which 
many merchants and investors use in connection 
with this work is as follows : 

"Central of New Jersey," "Chicago, Milwaukee 
& St. Paul," "Delaware & Hudson," "Great 
Northern," "Illinois Central," "Louisville & Nash- 
ville," "New York Central," "N. Y., N. H. & 
Hartford," "Pennsylvania" and "Pullman." The 
average prices for these ten since 1860 are given in 
another chapter of this book. 

The Wall St. Journal also has a list which is, 
however, more for the speculator than the investor. 
This is known as the* 'list of 32 stocks" and contains 
12 industrial stocks: Smelters com., Amalgamated 
Copper, Rubber pfd., National Lead Co., U. S. 
Steel pfd., People's Gas, U. S. Rubber, U. S. Steel 
com., Sugar com., General Electric, Colorado Fuel 
& Iron, and American Car & Foundry; and 20 
active railway stocks: Atchison, Brooklyn Rapid 
Transit, Canadian Pacific, Delaware & Hudson, 
Northwest, St. Paul, Twin City Rapid Transit, 
Erie, Louis. & Nash., Northern Pacific, Missouri 
Pacific, N. Y. Central, Pennsylvania, Reading, 
Southern Pacific, Southern Railway com., Union 
Pacific, Norfolk & Western, Baltimore & Ohio 
and Illinois Central. 

As an aid in determining the tendency of the 
market, merchants make a dot at the center of 
each movement, or midway between the high point 
and the low point of each main swing. These dots 



320 BUSINESS BAROMETERS 

are then connected with a line and this line shows 
at a glance the tendency of the market. 

When two or three plots are made, it is interesting 
to compare a railroad plot with one for industrials, 
as there is a constant, though complicated relation 
between the two. Space does not permit a de- 
scription of this matter in detail, so it must suffice 
to state that a change in conditions may sometimes 
be discerned more quickly by having the two plots, 
one for railroads and the other for industrials, than 
if both are averaged together on the one plot. 
However, as the industrial quotations almost always 
follow the railroad quotations, both in a rising market 
and in a falling market, one plot simply for the ten 
stocks above mentioned is perfectly satisfactory and 
avoids confusion. 

Another interesting plot is that for bond prices, 
and many merchants use the following ten as an 
index of this market : Atchison,Top. &Sa. Fe. Gen. 
4's; Baltimore & Ohio 1st 4's; Central of Georgia 
Cons. 5's; Central New Jersey Gen. 5's; Chicago 
& Alton Ref. 3's; Col. & Southern 1st 4's; New 
York Central 3J's;St. Louis & Sa. Fran. Ref. 4's; 
Southern Ry. Consol. 1st 5's; Wabash 1st 5's. 
Usually a change in the bond market precedes a 
change in the stock market. 

If considered in a conservative manner, the 
tendency of the stock market is very interesting to 
merchants when endeavoring to forecast business 
conditions. This is due to the fact that a change in 
the stock market is the first visible sign of a change 
in general business conditions. Railroad earnings 



STOCK EXCHANGE TRANSACTIONS 321 

are absolutely dependent upon business conditions, 
and stock market quotations are ultimately de- 
pendent upon earnings. Therefore, a rising market 
over a certain period of time, means that the major- 
ity of operators believe that fundamental condi- 
tions are more sound, while a falling market 
means that these operators believe that fundamental 
conditions are unsound and unsatisfactory. In 
other words, a study of the stock market gives one 
a composite idea of the opinions of the ablest bank- 
ers and brokers. This is the reason why the stock 
market often turns to go down while railroad earn- 
ings are increasing, and often turns to go up while 
railroad earnings are still decreasing. In order 
that an operator may make money, some other 
operator must lose money. Therefore, the one who 
makes the most is not only the one who guesses 
right, but the one who makes the right guess first. 
For this reason stock market movements are the 
first public sign of a marked change in fundamental 
business conditions. All plots of prices should, 
however, be supplemented by a plot of what the given 
stocks yield in order to allow for the changes in 
dividend rates. 

TRANSACTIONS 

A study of ''Quotations," without due consid- 
eration of "Transactions," is of little value, be- 
cause a rising market, during which only a few 
shares change hands, means very little, as such 
a market may be the result of manipulation. In 
the same way a falling market, when only a few 



322 BUSINESS BAROMETERS 

shares change hands, may mean very little. In 
order to reach a correct conclusion, the "quota- 
tions" should be considered in connection with the 
"volume." The principle which we have in mind 
is the same as "foot-pounds" in mechanics. 
"Pounds" by themselves are meaningless, and 
"feet" by themselves have no significance to the 
engineer. It does not mean very much to say the 
power is sufficient to lift a body weighing a hundred 
pounds or the power is sufficient to move a body 
one hundred feet. But when one states that there 
is power enough to lift one hundred pounds through 
one hundred feet of space, it is possible to judge 
correctly the power involved. A similar relation 
exists between the "Quotations" and the "Trans- 
actions." 

Therefore the leading bankers not only tabulate 
the quotations of the leading stocks and bonds, but 
also the "transactions." When the volume of busi- 
ness for any one or more months is constant, one 
may judge business conditions by the quotations 
alone, but unless this volume is constant, its vari- 
ations should always be taken into account. An 
average rise in the market of only 1% with a 
daily volume of 2,000,000 shares signifies a differ- 
ent state of affairs from that of a rise in the market 
of 1% with a daily volume of only 200,000 shares. 

Plots and charts are used by some stock ex- 
change houses in endeavoring to prophesy changes 
and turns in the market. Statisticians of stock 
exchange^houses are interested in studying these 
theories, but merchants should purposely avoid 



STOCK EXCHANGE TRANSACTIONS 323 

the subject. If followed too closely, these stock 
market plots are apt to be misleading, and by 
turning one's attention from the main object of 
this work, are a hindrance. The business of the 
merchant is not to anticipate stock exchange move- 
ments, but business movements. Although there 
is a relation between the two, they are, for the most 
part, quite distinct. 

The following conclusions are suggested rela- 
tive to "Stock Exchange Conditions."* 

1. During a Period of Business Depression. 

(a) An increase is a distinctly favorable sign 
that better trade conditions may be expected. 

(b) A decrease is a sign that continued dull- 
ness may be expected. 

(c) No change signifies uncertainty. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase signifies continued improve- 
ment. 

(b) A decrease signifies no improvement. 

(c) No change signifies temporary uncertainty. 

3. During a Period of Prosperity. 

(a) A great increase usually is a very unfa- 
vorable sign. 

(b) A great decline calls for caution. 

(c) No change singifies temporary uncer- 
tainty. 

4. During a Period of Decline Following a Pe- 

riod of Prosperity. 

(a) An increase signifies that liquidation is 
in progress. 

*In all studies of "transactions" it must always be noted whether the 
transactions increase when the prices are increasing or decreasing. 



324 BUSINESS BAROMETERS 

(b) A decrease signifies less satisfactory con- 
ditions. 

(c) No change signifies temporary . uncer- 
tainty. 

NEW SECURITIES 

The reason for studying the subject of "New 
Listings" may be understood by a review of the 
three following laws of economics: 

1. During a Period of Prosperity, as the number 
of new companies, new promotions and new securities 
listed increases, the danger of a panic increases and 
the time between said Period of Prosperity and a 
future Period of Depression decreases. 

2. When the number of new promotions, new com- 
panies and new listings is at a minimum, financial 
depression is sure to be reaching an end. 

3. As the number of new companies, new promo- 
tions and new listings increases from a minimum, the 
gradual increase is a sign of improved conditions until 
the normal number of new companies, new promo- 
tions and new listings is reached, after which an in- 
crease again becomes a source of danger. 

Out of the list of twenty-five subjects of which 
this book treats, this one, namely, "The Number of 
New Companies, New Promotions and New Se- 
curities Listed," is the one by which it was most 
clearly possible to forecast the panic of 1903. For 
this reason this panic was said to be due to "un- 
digested securities" and was known as "The Rich 
Man's Panic." 

Of course one cannot rely upon the study of this 



NEW SECURITIES 325 

one subject, as many panics have taken place when 
the figure for "New Securities" has been normal and 
the change in conditions could only have been 
forecasted by a study of the other subjects. In 
fact, the difficulty in studying this subject is that 
the figures remain very constant for a long period 
of time, and it is only the great movements up or 
down which are of any use. 

Under normal conditions a study of this subject 
is of little value, but it is most useful under ab- 
normal circumstances. If we are in a period of 
depression and we reach a period where no new 
companies are incorporated and there are absolutely 
no new promotions or listings, we may be sure of 
better conditions in the near future. Conversely, 
if we are in a period of prosperity and there are an 
abnormally large number of promotions, an abnor- 
mally large number of new corporations being 
formed and new securities being listed, we may be 
absolutely sure of trouble. This usually comes 
first in the form of tight money, followed immedi- 
ately by a decline in the bond and stock market, 
and later by a period of depression in business 
conditions. 

The following figures clearly show this, particu- 
larly in connection with the panic of 1903: 





Stocks: Total value 




Bonds: Total value 


Year 


including new capital, 


Year 


including new capital, 




old and refunding issues 




old and refunding issues 


1885 


$56,913,116 


1885 


$197,259,000 


1886 


329,469,350 


1886 


238,097,690 


1887 


270,053,550 


1887 


343,477,321 


1888 


248,228,275 


1888 


511,002,218 


1889 


259,649,774 


1889 


389,720,000 


1890 


437,992,330 


1890 


684,867,879 



326 BUSINESS BAROMETERS 



1891 


$188,914,954 


1891 


$287,645,700 


1892 


237,036,105 


1892 


317,861 500 


1893 


198,245,261 


1893 


288,803,400 


1894 


251,193,003 


1894 


309,804,600 


1895 


143,373,970 


1895 


257,275,400 


1896 


590,732,215 


1896 


582,286,700 


1897 


502,974,891 


1897 


357,415,902 


1898 


528,153,996 


1898 


700,064,680 


1899 


704,172,605 


1899 


525,384,240 


1900 


620,935,000 


1900 


443,713,000 


1901 


1,642,013,715 


1901 


923,010,100 


1902 


784,032,595 


1902 


a533, 519,300 


1903 


426,890,295 


1903 


581,288,800 


1904 


175,866,800 


1904 


535,079,600 


1905 


533,434,900 


1905 


980,026,650 


1906 


662,769,450 


1906 


b571,898,500 


1907 


576,032,050 


1907 


420,813,000 


1908 


513,927,450 


1908 


872,958,000 


1909 


1,325,526,485 


1909 


1,098,956,500 


1910 


1,239,501,545 


1910 


808,162,500 


1911 


588,038,145 


1911 


739,692,700 



(a) Does not include Imperial Russian States 4% Certificates §1,155, 
000,000. 

(b) Does not include $425,000,000 Japanese Government bonds. 

Therefore all the merchants systematically tabu- 
late each month the amount of new securities listed, 
although the "stocks" and "bonds" are added; thus 
avoiding the necessity of two tables. 

The following conclusions are suggested relative 
to "New Securities Issued." 

1. During a Period of Business Depression. 

(a) An increase signifies improvement. 

(b) A decrease signifies no improvement. 

(c) No change generally calls for caution. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase signifies continued improve- 
ment. 

(b) A decrease signifies no improvement. 

(c) No change calls for caution. 

3. During a Period of Prosperity. 



CROP CONDITIONS 327 

(a) An increase, especially if great, is a sign 
of no further improvement, and the culmination 
of the period of prosperity. 

(b) A decrease tends to lengthen this period 
of prosperity and thus signifies continued im- 
provement. 

(c) No change usually calls for caution. 

4. During a Period of Decline Following a Period 
of Prosperity. 

(a) An increase signifies no improvement. 

(b) A decrease indicates that conditions are 
naturally adjusting themselves. 

(c) No change signifies no improvement, if 
large issues are still being offered, but otherwise it 
shows nothing of importance. 

CROP CONDITIONS 

This subject does not now hold the same rela- 
tive importance in the study of Fundamental 
Statistics that it held when statistics on other 
topics were less carefully compiled. But since the 
full annual harvest of the grains and cotton is 
one factor at the bottom of American business 
prosperity, the condition of the standing crops will 
always be interesting and valuable as a barometer. 
Of all subjects studied by the merchant and investor 
it is the only one which the Government attempts 
to forecast. Figures on banking conditions, labor 
conditions, imports and exports are accumulated 
by the Government and are valuable as a matter of 
history; but for none of these subjects is there any 



328 BUSINESS BAROMETERS 

official attempt to use the figures for forecasting 
conditions. 

But in the subject of crops, not only does the 
Government publish a report on their amount and 
condition in various stages from planting to the be- 
ginning of harvest, but it makes a prediction for the 
benefit of business interests of what the total crop 
is likely to be. It has been well proved that this 
forecast made by the Government is better than 
any forecast which at the present time can be made 
by any association of merchants or bankers inde- 
pendently. 

For this reason the method of compiling and 
distributing these forecasts should be clearly under- 
stood and the following is a detailed explanation by 
Chas. C. Clarke, of the U. S. Bureau of Statistics: 

''There are three divisions in the Bureau of 
Statistics of the Department of Agriculture: the 
Division of Domestic Crop Reports, the Division 
of Foreign Markets, and the Editorial Division 
and Library, each of which has a chief of division 
reporting directly to the Statistician. 

"Statistical information concerning crop pro- 
duction and live stock that is collected by the slow 
and exact methods of a census is generally not given 
to the public until after the crops enumerated are 
harvested and marketed and the immediate inter- 
est in it has passed away. Prices of agricultural 
products are primarily governed by the law of 
supply and demand; therefore early information 
concerning the supply is of value to all. Those 
who produce and those who consume are vitally 



CROP CONDITIONS 329 

interested as well as the dealer who stands between 
them. The relations and mutual interests of agri- 
culture, manufacture, and commerce demand that 
there should be published at brief intervals during 
the crop season reliable information on the condi- 
tion, acreage, production, and value of the princi- 
pal crops, by States and agricultural areas. 

"As commerce consists largely in an exchange of 
the products of agriculture and manufacture among 
their respective producers, commerce thrives as 
the farmer and the factory operative prosper. 
Some individuals, however, do not always regard 
the common welfare, and injurious commercial 
speculations occur when ignorance prevails concern- 
ing the condition of our crops and the true rela- 
tions of supply and demand. At such times the 
farmer often does not obtain just prices, while the 
consumer derives no benefit and business is inju- 
riously affected. The consequences of false re- 
ports concerning the condition and prospective 
yield of the cotton crop alone may be very injurious. 
If there were no adequate Government crop-re- 
porting service, and by misleading reports specu- 
lators should depress the price a single cent per 
pound, the growers would lose $60,000,000 or more; 
if the prices were improperly increased, the manu- 
facturers and allied interests would be affected to a 
proportionate degree. All interests therefore de- 
mand that the true condition of crops should be 
made known promptly, and harmful speculation 
discouraged. 

"The Bureau of Statistics issues each month de- 



330 BUSINESS BAROMETERS 

tailed reports relating to agricultural conditions 
throughout the United States, the data upon which 
these facts are based being obtained through a 
special field service, a corps of State statistical 
agents, and through a large body of voluntary 
correspondents composed of the following classes: 
county correspondents, township correspondents, 
individual farmers, and special cotton corre- 
spondents. 

"The special field service is composed of seven- 
teen traveling agents, each assigned to report for a 
given group of States. They are. especially quali- 
fied by statistical training and practical knowl- 
edge of crops. They systematically travel over 
the districts assigned to them, carefully note the 
development of each crop, keep in touch with best 
informed opinion, and render written and tele- 
graphic reports monthly and at such other times as 
required. 

"There are forty-five State statistical agents, 
each located in a different State. Each of these 
reports for his State as a whole, and maintains a 
corps of correspondents entirely independent of 
those reporting directly to the Department at 
Washington. These State statistical correspond- 
ents report each month directly to the State agent 
on schedules furnished them. These reports are 
then tabulated and weighted according to the 
relative product or area of the given crop in each 
county represented, and are summarized by the 
State agent, who co-ordinates and analyzes them in 
the light of his knowledge of conditions derived 



CROP CONDITIONS 331 

from personal observation and other sources, and 
prepares his monthly and other written and tele- 
graphic reports to the department. 

"There are approximately 2,800 counties of ag- 
ricultural importance in the United States. In 
each of these counties the Department has a prin- 
cipal county correspondent who maintains an 
organization of several assistants. These county 
correspondents are selected with special reference 
to their qualifications and constitute an efficient 
branch of the crop-reporting service. They make 
the county the geographical unit of their reports, 
and after obtaining data each month from their 
assistants and supplementing these with informa- 
tion obtained from their own observation and 
knowledge, report directly to the Department at 
Washington. 

" In the townships and voting precincts of the 
United States in which farming operations are 
extensively carried on, the Department has town- 
ship correspondents who make the township or 
precinct the geographical basis of reports, which 
they also send directly to the Bureau of Statistics 
each month. Finally, at the end of the growing 
season, a large number of individual farmers and 
planters report on the results of their own in- 
dividual farming operations during the year; and 
valuable data are also secured from 30,000 mills 
and elevators. 

" With regard to cotton, all the information 
secured from the foregoing sources is supple- 
mented by that furnished by special cotton cor- 



332 BUSINESS BAROMETERS 

respondents, embracing a large number of per- 
sons intimately concerned in the cotton industry, 
and, in addition, inquiries in relation to acreage 
and yield per acre of cotton are addressed to the 
list of cotton ginners through the courtesy of the 
Bureau of the Census. 

" Eleven monthly reports on the principal crops 
are received yearly from each of the special field 
agents, county correspondents, State statistical 
agents, and township correspondents, and one re- 
port relating to the acreage and production of 
general crops is received during the year from 
individual farmers. 

11 Six special cotton reports are received during the 
growing season from the special field agents, from 
the county correspondents, from the State statis- 
tical agents, and from township correspondents, 
and the first and last of these report relating to the 
acreage and pro-individual farmers, special cor- 
respondents, and cotton ginners. 

"The general reports for January and February 
are combined on one schedule and relate to the 
number and value of farm animals. 

"The general report for March relates to the 
stock of grain in farmers' hands, the distribution 
and consumption of corn, wheat, and oats, and the 
average weight per bushel of wheat and oats. 

11 Reports on the condition of the crops of the 
year begin with the April report, when the con- 
dition of winter wheat and rye is dealt with, pre- 
vailing diseases of farm animals, and losses from 
disease and exposure. 



CROP CONDITIONS 333 

"The report for May comes at a time when few 
of the crops are sufficiently advanced for their 
condition to be reported upon; consequently the 
inquiries relative to condition apply only to winter 
wheat, rye, meadow mowing lands, and spring 
pasture. This schedule also deals with the portion 
of the original acreage sown to winter wheat if, for 
any reason, any has been or will be abandoned, and 
contains inquiries with regard to farm labor and 
tenants. 

"The schedule for June deals with the acreage 
of six crops, the most important of which is spring 
wheat. It also covers the condition of wheat, oats, 
barley, rye, clover, spring pastures, apples, peaches, 
and rice. 

"The July schedule deals with the acreage of 
corn, potatoes, tobacco, and sugar cane; the stocks 
of wheat in farmers' hands; the average condition 
of all the principal crops, fruits, and spring past- 
ures, and the average weight of wool per fleece. 

"The August schedule deals with the average 
yield of winter wheat per acre, acreage of buckwheat 
and hay, the condition of the principal crops, the 
quality of clover hay, and the stocks of oats in 
farmers' hands. 

"The September schedule deals with the condi- 
tion, when harvested, of wheat, oats, barley and 
rye; the acreage of clover seed; the production of 
peaches, and the number and condition of stock 
hogs on hand for fattening. 

"The October schedule deals with the average 
yield per acre and the quality of spring wheat 



334 BUSINESS BAROMETERS 

barley, oats, rye and hops, and the condition of 
corn, potatoes, sugar cane, tobacco, rice and apples. 

"The November schedule deals with the average 
yield per acre of corn, buckwheat, potatoes, hay, 
tobacco and rice. 

11 The December schedule deals with the produc- 
tion and farm prices of all the principal crops, 
and the acreage of winter wheat and rye sown for 
the crop of the following year, and also with the 
condition of winter wheat and rye. 

"In addition to the foregoing, the reports during 
the past two years have been extended to include 
condition figures of many small fruits, vegetables 
and minor products. Information in regard to 
such products has been urgently requested, and as 
a basis for comparison has now been satisfactorily 
established, the reports are received with interest 
and favorable comment. 

"Previous to the preparation and issuance of the 
Bureau's reports each month, the correspondents 
of the several classes send their reports separately 
and independently to the Department at Washing- 
ton. 

"In order to prevent any possible access to re- 
ports which relate to speculative crops, and to 
render it absolutely impossible for premature in- 
formation to be derived from them, all of the reports 
from the State statistical agents, as well as those of 
the special field agents, are sent to the Secretary of 
Agriculture in specially prepared envelopes ad- 
dressed in red ink with the letter "A" plainly 
marked on the ends. By an arrangement with the 



CROP CONDITIONS 335 

postal authorities these envelopes are delivered to 
the Secretary of Agriculture in sealed mail pouches. 
These pouches are opened only by the Secretary or 
Assistant Secretary, and the reports, with seals un- 
broken, are immediately placed in the safe in the 
Secretary's office, where they remain sealed until 
the morning of the day on which the reports are 
issued, when they are delivered to the Statistician 
by the Secretary or the Assistant Secretary. The 
combination for opening the safe in which such 
documents are kept is known only to the Secretary 
and the Assistant Secretary of Agriculture. Re- 
ports from special field agents and State statistical 
agents residing at points more than 500 miles from 
Washington are sent by telegraph, in cipher. Those 
in regard to speculative crops are addressed to the 
Secretary of Agriculture. 

"Reports from the State statistical agents and 
special field service in relation to non-speculative 
crops are sent in similar envelopes marked "B," 
which go to the Bureau of Statistics, and are kept 
securely in a safe until the data contained in them 
are required by the Statistician in computing esti- 
mates regarding the crops to which they relate. 
The reports from the county correspondents, 
township correspondents and other voluntary 
agents are sent to the Chief of the Bureau of Sta- 
tistics by mail in sealed envelopes. 

"The plan of intrusting the final preparation 
of reports to a crop-reporting board has been con- 
tinued during the past year, and after three full 
years of trial it has been demonstrated that such is 



336 BUSINESS BAROMETERS 

an excellent and satisfactory method. It relieves 
one man of the strain and responsibility, and secures 
the benefits of consultation and a consensus of 
judgment of men who have been on the ground. 

"The Crop Reporting Board is composed of the 
Chief of Bureau as chairman, and four other mem- 
bers, whose services are brought into requisition 
each crop-reporting day from among the statis- 
ticians and officials of the Bureau, and the special 
field and State statistical agents who are called to 
Washington for the purpose. 

"The personnel of the board is changed each 
month. The meetings are held in the office of the 
Statistician, which is kept locked during sessions, 
no one being allowed to enter or leave the room or 
the Bureau, and all telephones being disconnected. 

"When the board has assembled, reports and 
telegrams regarding speculative crops from State 
and field agents which have been placed unopened 
in a safe in the office of the Secretary of 
Agriculture, are delivered by the Secretary, 
opened and tabulated. The reports, by States, 
from the several classes of correspondents and 
agents relating to all crops dealt with are 
brought together in convenient parallel columns 
on final tabulation slips. The board is thus 
provided with several separate estimates cover- 
ing each State and each separate crop, 
made independently by the respective classes of 
correspondents and agents of the Bureau, each re- 
porting for a territory or geographical unit with 
which he is thoroughly familiar. 



CROP CONDITIONS 337 

"Abstracts of the weather condition reports in 
relation to the different crops, by States, are also 
prepared from the weekly bulletins of the Weather 
Bureau. With all these data before the board, 
each individual member computes independently, 
on a separate sheet or final computation slip, his 
own estimate of the acreage, condition, or yield of 
each crop, or of the number, condition, etc., of 
farm animals for each State separately. These 
results are then compared and discussed by the 
board under the supervision of the chairman, and 
the final figures for each State are decided upon. 
It has been interesting to note how often the re- 
ports of the different classes of correspondents and 
agents are very nearly identical and how closely 
the figures arrived at independently by the indi- 
vidual members of the board agree. The estimates 
by States as finally determined by the board are 
weighted by the acreage figures for the respective 
States, the result for the United States being a true 
weighted average for each subject. 

"Reports in relation to cotton, after being pre- 
pared by the Crop Reporting Board, and personally 
approved by the Secretary of Agriculture, are issued 
on the second or third day of each month during 
the growing season, and the reports relating to 
the principal farm crops and live stock are prepared 
and made public on the ninth or tenth day of each 
month. In order that the information contained 
in these reports may be made available simul- 
taneously throughout the entire United States, 
they are handed, at an announced hour on report 



338 BUSINESS BAROMETERS 

days, to all applicants and to the Western Union 
Telegraph Company and the Postal Telegraph 
Cable Company, who have branch offices in the 
Department of Agriculture, for transmission to the 
exchange and to the press. These companies have 
reserved their lines at the designated time, and 
forward immediately the figures of most interest. 
A mimeograph or multigraph statement also, con- 
taining such estimates of condition or actual pro- 
duction together with the corresponding estimates 
of former years for comparative purposes, is pre- 
pared and sent immediately to exchanges, news- 
paper publications and individuals. The same 
afternoon printed cards containing the essential 
facts concerning the most important crops of the 
report are mailed to the 77,000 post-offices through- 
out the United States for public display, thus 
placing most valuable information within the 
farmer's immediate reach. 

"Promptly after the issuing of the report, it, 
together with other statistical information of value 
to the farmer and the country at large, is published 
in the Crop Reporter, an eight-page publication of 
the Bureau of Statistics, under the authority of the 
Secretary of Agriculture. An edition of over 120,- 
000 copies is distributed to the correspondents and 
other interested parties throughout the United 
States each month . Thus the information is spread 
broadcast." 

As the government crop statistics are necessary 
and valuable as business barometers, so figures 
showing the production of leading commodities are 
of intense interest. 



CROP CONDITIONS 339 

The production of iron, for example, reported 
by the two leading weeklies on the subject, is a 
very important factor in determining present condi- 
tions and forecasting future conditions. This was 
especially true before the United States Steel Cor- 
poration was formed and to a large extent is also 
true to-day. Figures regarding pork, copper, wool, 
coffee, rubber, sugar and other commodities are 
also of interest. A decrease in the production of 
commodities is always accompanied by a decrease 
in activity, which means that men and capital are 
idle. This reduced activity, if pressed beyond a 
certain point, will result in a crisis followed by a 
period of depression. 

This subject, as especially applicable to the in- 
vestor, is well presented by Henry Hall somewhat 
as follows : 

"A large part of the income of all railroad lines is 
derived from the shipment of grain, produce and 
cotton. From 6,000,000,000 to 15,000,000,000 
tons of these articles are shipped by rail to sea- 
board cities every year, for exportation to other 
lands. A far larger tonnage is moved by rail from 
farm and plantation to cities and other settlements 
of the country for home consumption. The con- 
tribution to railroad traffic from this source always 
exceeds more than 30,000,000,000 tons of grain, 
10,000,000,000 tons of flour, about 3,000,000,000 
tons of cotton, and a vast additional quantity of 
potatoes, tobacco, fruit and other products of the 
harvest. More than once in our history, in dull 
times, has a loss in other earnings been made good 



340 * BUSINESS BAROMETERS 

by the transportation of agricultural produce; and 
in good times, bumper crops are of enormous and 
direct value to every railroad in the land. 

" The productions of the soil affect powerfully the 
prosperity of the United States in another way. 
Their money value in a good year is almost be- 
wildering. The staple crops which are reported 
officially with monthly statements of acreage and 
conditions approximate a money value of $3,500,- 
000,000; and a fluctuation of $500,000,000 in this 
immense total, which is not uncommon, is felt at 
once in the business world. A boom in stocks has, 
more than once, originated in good crops. De- 
pression has at times begun with a partial crop 
failure. 

"Bountiful harvests have another and interesting 
effect, in that the exportable surplus enables the 
United States to pay off its borrowed money abroad 
and to create a credit, which, if large enough, in- 
sures early importations of gold. There is no 
topic more deserving of interested attention than 
the state of the crops." Another writer states: 

"The country requires an increase in yield of at 
least 5% in all its principal crops, cotton perhaps 
excepted; and in some cases an increase of at least 
10% would be advisable, either through larger 
acreage or better cultivation. This would insure 
more reasonable prices for food products, thus 
reducing the cost of living about which so much just 
complaint is heard. It would also stimulate larger 
exports, the decline of which during some years 
has been one of the most unfortunate accompani- 



CROP CONDITIONS 341 

ments of our business depressions. Larger exports 
of agricultural products would do more than 
anything else toward restoring the equilibrium of 
our foreign trade and would stimulate business at 
home." 

The profits, and therefore the stocks of railroad 
companies which operate through the grain and 
cotton sections, are affected in the most direct and 
powerful manner by the promise of generous or 
stunted crops. Investors need to keep in touch 
with the crop outlook. Wall Street always dis- 
counts the future and never waits for earnings to 
be affected actually before adjusting prices to 
what it sees coming. 

A slackening in the investment business comes 
during a great boom, and precedes every financial 
crisis; and every investor should be as alert to 
detect the signs of a coming change of importance 
as are the bankers, brokers and stock operators, 
who are continually watching the crops as well as 
the Composite Plot. 

It is axiomatic that all railroads are affected 
directly and seriously by crop conditions, and 
industrial stocks peculiarly so. Therefore the 
subject of "Crops" is one which requires constant 
attention, and never more so than when a boom or 
reaction has run on for a number of months or 
years. Conservative merchants and investors there- 
fore tabulate each month as published, the Government 
Estimate of the wheat, corn and cotton crops, then in 
the ground, together with the annual figures when the 
crops have been harvested. 



342 BUSINESS BAROMETERS 

The following conclusions are suggested rela- 
tive to "Crops and other Commodities":* 

1. During a Period of Business Depression. 

(a) Improved crop conditions are often the 
beginning of a period of improvement. 

(b) Poorer crop conditions delay an im- 
provement in general business, or signify no im- 
provement. 

(c) No change is favorable or unfavorable 
according as to whether this means good crops or 
otherwise. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) Improved crop conditions always give an 
impetus to the general improvement in conditions, 
and thus signify continued improvement. 

(b) Poorer crop conditions usually signify no 
improvement. 

(c) No change is favorable or unfavorable 
according to what it represents. 

3 . During a Period of Prosperity. 

(a) Improved crop conditions tend to 
lengthen the period of prosperity; but bumper 
crops often precede a decline. 

(b) Poor crop conditions tend to shorten 
said period, and signify no improvement. 

(c) No change is favorable or unfavorable 
according to what it represents. 

4. During a Period of Decline Following a Period 

of Prosperity. 

*The condition of the crops has direct bearing upon the condition of the 
farmer, and an indirect interest for every investor and merchant. 



RAILROAD EARNINGS 343 

(a) Improved crop conditions sometimes tend 
to forestall a panic and promote an improvement. 

(b) Poor crop conditions tend to hasten 
said time and perhaps cause a panic. 

(c) No change is or is not of importance 
according to what it represents. 

RAILROAD EARNINGS 

Railroad earnings are of interest for two reasons : 
first, in forecasting the conditions of the railroads, 
upon which the prices of securities are directly de- 
pendent; secondly, in determining and forecasting 
the condition of general business. 

Although stocks of roads barely earning their 
operating expenses and interest charges are of 
some nominal value simply on account of their 
voting power (and this value is generally considered 
in the vicinity of about $10 per share, par value 
$100) yet railroad stocks as a rule are worth very 
little unless the roads are earning money. But 
whether or not a stock pays a dividend, it is self- 
evident that the prices must vary as the earning 
power. Increased earnings forecast increased 
values for the securities, and reduced earnings 
forecast lower values. Manipulation may tem- 
porarily force stocks far above or far below their 
true investment value, but neither high prices nor 
low prices can artificially be maintained for long. 
In the end the prices must adjust themselves 
according to earnings. As most investments are 
either directly or indirectly dependent upon rail- 
roads, railroad earnings are of great importance 
to the investor. 



344 BUSINESS BAROMETERS 

For the purpose of forecasting general business 
conditions, railroad earnings are also of interest. 
As statistics they are so important for this purpose 
that many merchants consider railroad earnings 
second only to bank clearings in making up a 
barometer of actual business conditions. There are 
several reasons for this choice, of which the two 
following are especially well founded : 

(1). Because nearly all bills are paid in checks, 
bank clearings serve as a barometer of the total 
amount of sales; but railroad earnings likewise 
serve as a similar barometer, because practically 
all goods purchased or sold are shipped on the rail- 
roads. If the freight earnings of the United States 
show an increase, it is very evident that manufactur- 
ing and commerce is increasing; and the same is 
true conversely, if the freight earnings are de- 
creasing. Therefore the earnings of the railroads 
may be considered in the same manner as the clear- 
ings of the banks, especially when "tonnage," 
rather than cash receipts is considered. 

(2). Another important reason is that not only 
are railroad conditions a barometer of trade condi- 
tions, but to a large extent they are the basis of 
general trade conditions. This is due to the fact 
that the railroads employ so large a proportion of 
the working class population of the United States, 
and that so many industries are absolutely de- 
pendent on the railroads for their business. The 
railroads are the best purchasers of contractors' 
supplies and contract labor; of iron and steel for 
rails and bridges; of lumber for ties and stations; 



RAILROAD EARNINGS 345 

of coal for motive power and heating; of oil for 
lighting and lubricating; of printers' supplies for 
time-tables, tickets, etc., etc. In fact this list might 
be indefinitely extended to show that the prosper- 
ity of the country is inseparably connected with the 
prosperity of the railroads. 

Therefore, for the above two reasons, the wise 
investor and merchant very carefully watches 
railroad earnings, both for determining the present 
conditions and for forecasting future conditions. 
In this connection the history of railroad earnings 
during the past three depressions may be of inter- 
est. During the reaction of 1873 the high level of 
gross earnings was reached in the same calendar 
year as the panic itself, but the recession from this 
high point was fairly evenly spread over the next 
four years. The recovery, on the contrary, was 
strikingly rapid. In 1879, only two years after 
gross earnings had been at their worst, they made a 
new high record. 

By reducing "maintenance charges," the net 
earnings increased for a year after the reaction 
began, the gain between 1873 and 1874 having been 
almost four per cent. Thereafter net earnings 
declined along with the gross, to their low level in 
1877. In the following two years they recovered 
even more rapidly than gross earnings, making up 
most of their lost ground in one year. The re- 
action between the top and bottom levels in net 
earnings was practically 10%, but between the two 
years in which the gross receipts sank from top to 
bottom levels, the difference in net was considerably 



346 BUSINESS BAROMETERS 

less. Moreover this decrease was accompanied by 
an increase in mileage of nearly 12%. 

While the panic of 1873 severely checked rail- 
road construction, it by no means checked such 
development altogether. This crisis followed one 
of the most pronounced waves of railroad construc- 
tion ever witnessed. In two years preceding the 
panic, operated mileage increased by 21,600 miles, 
or 48%, which of course is always a distinct danger 
signal. 

The next depression of 1884—5 shows a difference 
from other depressions in the relation of operating 
expenses to volume of business. Thus in 1894, the 
percentage decline in net earnings was a trifle less 
than that of gross; but in the '80's the lessening 
volume of traffic was not accompanied by a pro- 
portionate reduction in earnings. The comparison 
of top and bottom levels in this depression follows : 

Gross Net 

$807,112,780 $291,587,588 

772,567,883 269,493,931 

34,543,897 22,093,657 

4.2 7.5 
* Increase 

"In so serious a crisis as that ofthe'90's, the maxi- 
mum reaction in railroad earnings was not more 
than 12%. However, aggregate figures covering 
so many railroads of such wide diversity of location 
and condition, tend to obscure the facts as they 
apply to individual undertaking. Constant addi- 
tion of new mileage tends to reduce the record of 
damage sustained by the old roads. The reduc- 
tion of the figure to a mileage basis would still be 
an inaccurate test, because the earning power of new 





Mileage 


1883 


106,938 


1885 


123,320 


Decrease 


*16,382 


Per cent. 


*15.3 



RAILROAD EARNINGS 347 

and additional mileage is naturally low. Further- 
more, construction of new roads frequently takes 
away business from those roads already in exist- 
ence, and thus tends to lower the average earnings 
per mile without any actual decrease in the amount 
of business. A comparison between fat and lean 
years could best be made by using figures for iden- 
tical mileage." 

Aggregate railroad earnings reached a new high 
level in 1893 and again acted as a distinct danger 
signal, for the crisis itself took place in the second 
half of that calendar year. The reaction in general 
business came the next year, when both gross and 
net immediately reached the low level of that 
movement. The recovery, though slow, was 
fairly continuous throughout five or six succeeding 
years. The extent of the reaction from the top 
level of 1893 to the bottom level of 1894 is shown 
in the following figures : 

Gross Net 

$1,207,106,626 $358,648,918 

1,066,943,358 317,757,399 

140,163,268 40,891,519 

11.6 11.4 

2,602,757,503 833,339,600 

2,407,019,810 717,802,167 

The next high point was reached in 1907, when 
the aggregate mileage increased to 228,128, the 
aggregate gross, to $2,602,757,503 and the aggre- 
gate net to $833,339,600. This gross and net fell 
off simultaneously with the decrease in business, 
an aggregate total of about 9%, the low point 
having been reached in the latter part of the summer 





Mileage 


1893 


175,441 


1894 


178,054 


Decrease 


*2,613 


Percent. 


*1.5 


1907 


228,128 


1908 


232,046 


* Increase 



348 BUSINESS BAROMETERS 

of 1908. Since that time there has been a gradual 
improvement. 

It therefore is advisable for merchants and investors 
to select about ten large roads, operating in different 
parts of the country and systematically tabulate their 
gross earnings as published each month. As the final 
figures for all roads are published, they also are in- 
teresting to note; but for practical purposes it is much 
better to tabulate the earnings of only ten. 

The following conclusions are suggested relative 
to "Railroad Earnings."* 

1 . During a Period of Depression. 

(a) An increase signifies that conditions are 
improving. 

(b) A decrease signifies no improvement. 

(c) No change usually signifies uncertainty. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase signifies that the improve- 
ment in conditions is progressing satisfactorily. 

(b) A decrease signifies no improvement, or 
that the improvement is temporarily checked. 

(c) No change signifies nothing definite. 

3. During a Period of Prosperity. 

(a) A great increase usually signifies no fur- 
ther improvement. 

(b) A decrease during a period of prosperity 
is practically impossible. 

(c) No change calls for caution. 



♦The tabulation of Railroad Earnings is of great value to the merchant; 
but the investor must remember that the stock market declines before 
earnings decline, and that prices begin to increase several months before 
earnings show any increase. 



IDLE CAR FIGURES 349 

4. During a Period of Decline Following a 
Period of Prosperity. 

(a) An increase signifies no immediate im- 
provement can be expected. 

(b) A decrease signifies that conditions are 
rapidly becoming worse. 

(c) No change signifies nothing definite. 
Special Note: — In using the above rules — as also 

is true in regard to the rules given under other 
subjects — one must compare the present both with 
the corresponding month of the preceding year and 
with the preceding month of the same year. In 
other words, the merchant and investor when 
studying fundamental statistics or business barom- 
eters must not be misled by seasonable changes 
which are wholly normal. 

IDLE GAR FIGURES 

Idle car figures have been available only for a 
short time and investors and merchants have as 
yet given but little attention to this subject. They 
are, however, of even more direct interest in fore- 
casting business conditions, than are figures on 
"Railroad Earnings." In fact, idle car figures 
bear the same relation to railroad earnings as 
Government crop estimates bear to the final figures 
compiled after the crop has been gathered. 

These idle car figures are collected by the Ameri- 
can Railway Association which receives every two 
weeks from each railroad the number of their sur- 
plus cars or the number of the cars they are short, 
as the case may be. Of course no one railroad will 



350 BUSINESS BAROMETERS 

report at any given time both a surplus and a 
shortage ; but it is very natural for certain roads in 
certain localities to have a surplus; while other 
roads in an entirely different locality may report a 
shortage. All of these "surpluses" and "short- 
ages" are combined and reported in a total by the 
Association once in two weeks. 

As in the case of exports and imports, it is the 
balance, namely, the "net surplus" or "net short- 
age" that the investor or merchant watches with 
interest. It takes about six weeks for a car to be 
taken from a siding, looked over, loaded, deliv- 
ered and unloaded, and furnish its revenue. Then 
as the railroads do not publish the earnings of a 
car for about a month or more after received, it 
may be three months after a car is taken from the 
siding before the earnings of that car appear in the 
monthly statement. Conversely, it is also true 
that when a car is returned to the siding, the effect 
of taking it out of service will not show in the pub- 
lished earnings for several months thereafter. 

Therefore, by tabulating idle car figures the in- 
vestor and the merchant are able to forecast the publi- 
cation of an increase or a decrease in railroad earn- 
ings almost three months before its appearance. As 
railroad earnings are such an excellent barometer of 
trade conditions, so idle car figures serve as even a 
more valuable barometer, the only unsatisfactory feat- 
ure being that they do not include the cars in the 
repair shops. 

Note: — The American Railway Association di- 
vides its report into eleven divisions with a mini- 
mum of 155 roads located as follows: 



IDLE CAR FIGURES 351 

No. of Roads 

New England 8 

N. Y., N. J., Md., & E. Pa 22 

Ohio, Ind., Mich., & W. Pa 20 

Va., W. Va., No. Car., & So. Car 10 

Ky., Tenn., Miss., Ala., Ga., & Fla 19 

Iowa, 111., Wis., Minn. No. Dak 27 

Mont., Wyo., Neb., & So. Dak 3 

Kans., Colo., Okla., & I. T 15 

Ore., Idaho, Cal., Nev., & Ariz 18 

Canadian Lines 3 

Total 155 

The following conclusions are suggested rel- 
ative to "Idle Car Figures."* 

1. During a Period of Business Depression. 

(a) An increase of idle cars signifies no im- 
provement. 

(b) A decrease signifies that a change for 
the better may be expected. 

(c) No change signifies that caution is still 
necessary. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase in idle cars signifies no im- 
provement. 

(b) A decrease signifies improvement. 

(c) No change signifies that caution is still 
necessary. 

*Idle car figures are of great value to both merchant and investor as they 
forecast earnings. When the actual earnings are published it is often too 
late for the investor to profit thereby, as their effect has already been dis- 
counted. This, however, does not apply to idle car figures. 



352 BUSINESS BAROMETERS 

3. During a Period of Prosperity. 

(a) An increase in idle cars calls for caution. 

(b) A decrease signifies continued improve- 
ment. 

(c) Xo change signifies nothing unsatisfac- 
tory. 

4. During a Period of Decline Following a Period 

of Prosperity. 

(a) An increase calls for caution. 

(b) A decrease signifies improvement. . 

(c) No change signifies no improvement. 

POLITICAL FACTORS 

Some of the most successful merchants of the 
old school maintained that the three greatest 
factors which influence business conditions are 
crops, money and politics, and that of these the 
most important is the last named, politics. Cer- 
tainly this statement seems justified by a study 
of business conditions of the United States. That 
portion of American history with which these pages 
are most concerned, from 1860 up to the present 
time, is most admirably described by Alex. Dana 
Xoyes in his "Forty Years of American Finance." 

There has always been a most delicate relation 
between politics and the state of trade. Almost 
every period of depression and period of prosperity, 
although not wholly due to political conditions, 
has been greatly augmented by them. Among 
those various political factors may be mentioned the 
following : — 



POLITICAL FACTORS 353 

The "Embargo Act" in the early part of the 
century and the war of 1812. 

The establishment of the United States Bank. 

The discontinuance of the United States Bank. 

The beginning of "state rights" discussions. 

The slavery discussion and the Civil War. 

The "Reconstruction Acts." 

The inflation of the currency. 

The "Resumption Act." 

The silver coinage law. 

The resumption of specie movements. 

The circulation of silver certificates. 

The radical measures under President Arthur, 
followed by the panic of 1884. 

The campaign and the election of the Repub- 
lican Party in 1888, coincident with the period of 
prosperity. 

The silver purchase act and the great gold ex- 
portations followed by the panic of 1893. 

The tariff legislation of the '90s followed by the 
prosperous conditions of 1900. 

The various Bryan scares. 

President Roosevelt's campaigns against the 
trusts. 

The election of President Taft. 

Of all these various acts, the by far most 
influential were those affecting the currency and 
the tariff. Both of these are extremely sensitive 
questions. 



354 BUSINESS BAROMETERS 

Any change in the money standard or banking 
system, especially if it disturbs either foreign or 
domestic confidence, is very destructive to the com- 
mercial prosperity of the country. Even when 
banking questions or the money standard are dis- 
cussed in Congress, there seems to be an immediate 
division of interests between the producer or the 
manufacturer and the banker or the investor. The 
legislation desired by the producer seems to be op- 
posed by the investor and vice versa. The reason 
for this is very evident, for anything which tends 
to make money easier to the producer, depreciates 
the value of money in the hands of the bankers 
and investors who possess it. On the other hand, 
legislation which strengthens the importance of 
the banker and investor, tends to handicap the 
producer and manufacturer. 

Any legislation designed to reorganize the bank- 
ing system of the United States on anything but a 
gold basis, like that upon which the banking sys- 
tems of England and other countries are founded, 
always retards trade. Any legislation which 
gives any additional importance to gold is always 
greeted with approval by all classes of manu- 
facturers, merchants and investors. All other 
legislation, especially that recognizing as a standard 
silver or anything other than gold, is always a 
dangerous sign, often causing bankers and investors 
to call loans and raise rates. Such conditions usu- 
ally precede a general crisis. 

As to the propriety of high or low duties on 
foreign goods, this is an open question. Although 



POLITICAL FACTORS 355 

nearly all bankers are in favor of protection, yet 
most economists (on whose advice the bankers de- 
pend regarding many matters) are almost with- 
out exception against protection ; but whether high 
tariff for protection or low tariff for revenue only 
is best for the country, the fact remains that when- 
ever the subject is discussed and whenever there is 
to be a change in classifications or duties, this dis- 
cussion and legislation has always affected business 
conditions. Moreover, although the adoption of 
certain tariff legislation has given a great impetus 
to prosperity, yet the previous discussion of the 
subject has always tended to disturb confidence, 
promote a feeling of uncertainty and seriously 
check business. 

This is very well described by Henry Hall as 
follows : — 

"In the United States the business world has 
become accustomed to the protective principle; 
and even the prospect of reduced duties has always 
chilled the spirit of enterprise, while the reality 
has always given a setback to business, sooner or 
later. On the other hand, enactment of protective 
tariff, in lieu of one for revenue only, has always 
proved exciting and has quickened into intense 
activity the looms, forges and machinery of the 
entire country. 

"The backward state of American industry 
prior to the Civil War is held to have been due in 
large measure to the relaxation of protection under 
the tariff laws of 1842 and 1857. There can be no 
question that the twenty or more tariff enact- 



356 BUSINESS BAROMETERS 

merits from 1861, when the Morrill protective tariff 
went into operation to 1872 when the system had 
been fairly adjusted to the requirements of home 
industry, aided materially in developing the mines, 
sustaining the factories against foreign competi- 
tion, supplying the railroads with an immense and 
profitable traffic, and promoting the farming inter- 
est of every section of the States." 

The lower duties of 1883 on many manufactures, 
added to the force of other evil influences, ended 
in the crisis of 1884. The crisis of 1893 rose in 
a distinct measure from the agitation in the then 
Democratic Congress for a tariff for revenue only, 
which eventuated in the Wilson bill. The pros- 
perity which the States now enjoy must be at- 
tributed in a marked degree to the protective tariff 
enacted under President McKinley. 

All writers on crises agree in giving great weight 
to tariff changes. An investor should therefore at 
all times be fully informed with regard to such 
actual or possible revolutions in political control at 
Washington as are likely to have a bearing on the 
tariff laws. As a further illustration of this subject, 
the setback given business during the tariff dis- 
cussion of May to July, 1909, and the renewed 
business energy which followed upon the passing 
of the bill is of suggestive interest. 

Therefore successful bankers, merchants and in- 
vestors always carefully watch political conditions and 
if possible reduce them to a decimal or barometer 
index number. 



POLITICAL FACTORS 357 

The following conclusions are suggested relative 
to "Political Uncertainties:"* 

1 . During a Period of Business Depression. 

(a) An increase in political agitation usually 
signifies no improvement. 

(b) A decrease usually signifies an improve- 
ment. 

(c) No change is unfavorable or favorable 
according to whether or not any important meas- 
ure is under consideration. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase in political agitation usually 
signifies no improvement. 

(b) A decrease usually signifies an improve- 
ment. 

(c) No change is unfavorable or favorable 
according to whether or not any important meas- 
ure is under consideration. 

3 . During a Period of Prosperity. 

(a) An increase in political agitation fore- 
casts a decline. 

(b) A decrease often signifies continued 
improvement. 

(c) No change is unfavorable or favor- 
able according to whether or not any important 
measure is under consideration. 



*This assumes all political factors to be unfavorable and the best con- 
ditions to be when only routine business is being considered. However, 
there are times when certain political acts are distinctly favorable and then 
the reverse of these conclusions should apply. 



358 BUSINESS BAROMETERS 

4. During a Period of Decline Following a Period 
of Prosperity. 

(a) Same as above. 

(b) Same as above. 

(c) Same as above. 

Of course, if some legislation is under discussion 
the enactment of which would greatly relieve the 
situation, then an "increase" would be distinctly 
favorable, and a decrease distinctly unfavorable. 

SOCIAL CONDITIONS AND MISCELLANEOUS 
STATISTICS 

The condition of public opinion in the country 
as a whole, and the stand taken by any large num- 
ber of people, or a representative body of people, 
with regard to social or religious questions, exerts 
a constant influence upon business conditions. 
Not only in politics and the larger field of govern- 
ment as shown in election or municipal reforms, but 
in all religious or social movements, the feeling of 
the people should be watched closely. Most in- 
vestors and merchants look upon crops, money and 
politics as the three most important topics to study 
in order to form a clear idea of the present state of 
business and a sound judgment of what is to be ex- 
pected. They would also do well to look into the 
field of social and religious tendencies, because they 
will find there material of great use in determining 
the trend of business. 

From time immemorial, periods of prosperity 
have been accompanied by a decline in religious 
interests and by a laxness in moral and social cus- 



SOCIAL CONDITIONS 359 

toms. Conditions, religiously, socially and moral- 
ly, are always at their worst immediately preceding 
a severe crisis or panic. The perils to a nation 
during a period of prosperity are much greater 
than the perils accompanying a period of depres- 
sion. For this reason the social and commercial 
corruption which has followed the declaration of 
peace after great wars has always been more 
disastrous to the conquering country than the 
actual war. This has been true during all history. 

It was commercial and political corruption, 
rather than the Northern barbarians, that destroyed 
ancient Rome and that ruined beautiful Venice. 
It was commercial and social corruption that trans- 
formed Spain from the foremost empire of the 
world to a third rate power, and overturned the 
Bourbon empire in France. . England itself would 
have come to a similar fate had it not been for the 
revival of righteousness which drove the corrupt 
men from power at the time of the East Indian 
troubles and at other periods of her history. The 
American Civil War was followed by great financial 
and social corruption, and even General Grant, al- 
though himself incorruptible, could not save his 
country from the effect of greed and wrong- 
doing. 

The famous election which followed was noted 
for the frauds which characterized both parties, and 
these frauds were so gigantic that to this day it is 
uncertain whether Tilden or Hayes was actually 
elected President of the United States. As it is the 
case during all such periods of personal, commercial 



360 BUSINESS BAROMETERS 

and civic corruption, this period was followed by the 
great business depression beginning about 1873. 

Immediately following this depression a period 
of religious and civic revivals swept over the nation. 
The additions to churches, the great temperance 
movement, and other similar movements for right- 
eousness received an unprecedented impetus during 
these years following the panic of 1873. This re- 
turn to righteousness was again followed by a re- 
turn of prosperity in the early '80's. 

The nation, however, soon forgot whence these 
blessings came and religious interest again declined. 
This lack of interest in religious matters culminated 
in the panic of 1884. Once more the reign of un- 
godliness was checked and the country recuperated 
from the depression of 1884, and again enjoyed 
several years of wonderful prosperity. It, however, 
took the nation only a few years to forget again, and 
once more civic corruption, social immorality and 
intemperance began to increase. From 1890 to 
1893 religious and similar organizations showed 
very little growth. Consequently the era of pros- 
perity began to wane, and culminated in the panic 
of 1893. 

The panic of 1893 again brought people to think 
upon serious matters, and during the following few 
years there was a great revival of righteousness 
throughout America. In fact, the additions to 
churches and the growth of other religious move- 
ments even exceeded that, during the period follow- 
ing the panic of 1873. The people again cast aside 
luxuries, municipal and state governments were 



SOCIAL CONDITIONS 361 

purified, evil doers were replaced by men of high 
integrity, and great interest in all religious and 
moral undertakings developed in all parts of the 
country. 

People again lived in a decent and God-fearing 
manner in accordance with what their station per- 
mitted. Commercial houses forsook the careless 
and questionable methods used during former 
times and the old-fashioned "drummer" was re- 
placed by the modern high grade salesman. It was 
on this foundation that the new period of improve- 
ment started and it was due to this revival of right- 
eousness, that the country was able to enjoy many 
years of great prosperity which began simultane- 
ously with the close of the Spanish War in 1898 
and 1899. 

Unfortunately, however, the nation again forgot 
and was still unable to stand the temptations of a 
period of prosperity. Therefore again religious 
interest declined, political corruption re-opened and 
social immorality increased. Referring to these con- 
ditions Dr. Lyman Abbott once stated as follows: 

"Popular rumor attributed to Mr. McKinley's 
managers, although not to him, wholesale cor- 
ruption in securing his first nomination and his 
first election. This corruption has not been confined 
to any one locality or to any one party. It has 
been equally appalling in its dimensions in New 
York, Boston, Philadelphia, Cincinnati, Chicago, 
St. Louis, Minneapolis, Denver, and San Francisco. 
It has included not only Boards of Aldermen but 
Legislatures, and it has crept into both the admin- 
istrative and legislative departments of the Federal 



362 BUSINESS BAROMETERS 

Government. Two United States Senators and 
three United States Representatives have subjected 
themselves to criminal prosecution for participa- 
tion in frauds. Nor has this corruption been con- 
fined to political circles. Insurance companies, 
banks, trust companies, manufacturers, trade 
unions have all been implicated. More than one 
financial magnate is now serving a sentence for 
fraud. Others are under sentence and are awaiting 
the decision on appeal. Even judges have not been 
wholly free from suspicion of obligation for their 
election to the plutocracy." 

This is a description of the conditions from 1902 
to 1906, when the exposures commenced. Like all 
preceding periods of unrighteousness, this was 
followed by the panic of 1907, and the succeeding 
years of depression. 

Of course some writers, although admitting that 
a business depression revives interest in religious 
matters and that, during great prosperity, men do 
not have the time or inclination to give religious 
matters any thought, claim that the religious state 
of the nation does not affect the business condi- 
tions as here represented. Whether or not this is 
true, is debatable; but certainly a study of the his- 
tory of the United States and every other nation, 
seems to point to a definite relation between the 
two interests. Moreover, all economists agree that 
the religious condition of the country is distinctly 
worthy of study, — although they may disagree as to 
its relative importance compared with other sub- 
jects. 



SOCIAL CONDITIONS 363 

Thus President Taft said : "The hum of prosperity 
and the ecstasy of great profits are likely to dull our 
interest in these reforms and to lead us back again 
to the old abuses, unless we insist upon legislation 
which shall clinch and enforce those standards by 
positive law." 

And again: "The difficulty is that whenever 
everybody is prosperous, when everybody is com- 
fortable, then is the time when our old friend Satan 
steps in and helps along the evil cause; then is the 
time when we are apt to be inert and enjoy the 
things we have, without looking forward in the 
future and seeing that evils will grow and ulti- 
mately swamp us." 

Or to quote another authority: 

"Beware lest . . . thou say in thine heart, 'My 
power and the might of mine hand hath gotten me 
this wealth. But thou shalt remember the Lord 
thy God, for it is He that giveth thee power to get 
wealth.'" Deut. 8: 11, 17, 18. 

The following conclusions are suggested relative 
to "Social Conditions:" 

1 . During a Period of Business Depression. 

(a) An increase in social righteousness sig- 
nifies an improvement. 

(b) A decrease in social righteousness signi- 
fies no improvement and that conditions may 
become worse. 

(c) No change signifies uncertainty. 

2. During a Period of Improvement Following a 

Period of Depression. 



364 BUSINESS BAROMETERS 

(a) An increase in social righteousness sig- 
nifies continued improvement. 

(b) A decrease signifies no improvement 
or that the improvement may temporarily be 
checked. 

(c) No change signifies that caution should 
be used. 

3. During a Period of Prosperity. 

(a) An increase in social righteousness signi- 
fies continued improvement. 

(b) A decrease signifies no further improve- 
ment, but that a change for the worse may be ex- 
pected. 

(c) No change calls for caution. 

4. During a Period of Decline Following a 

Period of Prosperity. 

(a) An increase tends to shorten the period 
of decline and signifies an improvement. 

(b) A decrease signifies no improvement and 
tends to make the coming period of depression all 
the more severe. 

(c) No change signifies the same. 

STATISTICS SHOWING INCREASE IN THE MEM- 
BERSHIP OF CONGREGATIONAL CHURCHES 
IN THE UNITED STATES BY PROFESSION 

(This denomination is chosen as an illustration owing to their 
complete reports; but it is believed that the same changes 
from one year to another would be true of an average of the 
figures of all denominations.) 

Year No. of Add. Mem- Total Additions by 

to Chur- bers by New Profession per 

July ches Profession Members 100,000 Population 

1860 2,585 7,468 14,821 Decline 2 Persons 

1861 2,555 5,522 12,151 Depression 1 

1862 2,580 6,196 12,629 " 1 

1863 2,652 7,765 14,378 Prosperity 2 

1864 2,667 9,032 15,809 Decline 3 



SOCIAL CONDITIONS 



365 



Year 


No. of 


Add. Mem 


- Total 




Additions by 


to 


Chur- 


bers by 


New 




Profession per 


July 


ches 


Profession 


Members 


100,000 Population 


1865 


2,723 


11,030 


18,442 


Depression . 


. . 3 Persons 


1866 


2,780 


11,249 


19,994 


Improvement 


4 




1867 


2,810 


19,127 


30,210 


" 


5 ' 




1868 


2,951 


16,432 


28,246 


Prosperity . . 


..4 




1869 


3,043 


15,167 


27,373 


" 


..4 




1870 


3,121 


13,501 


25,137 


Decline 


. . 3 




1871 


3,202 


13,271 


23,343 


" 


. . 3 




1872 


3,263 


13,945 


25,394 


" 


. . 3 




1873 


3,325 


13,216 


24,620 


" 


. . 2 




1874 


3,403 


15,279 


27,300 


Depression . 


..3 




1875 


3,437 


17,306 


29,645 


" 


. . 4 




1876 


3,509 


20,844 


33,294 


" 


..5 




1877 


3,564 


24,138 


35,111 


" 


..5 




1878 


3,620 


20,498 


31,735 


Improvement 


. . 4 




1879 


3,674 


16,689 


27,506 


" 


. . 4 




1880 


3,745 


12,230 


22,749 


Prosperity . . 


. . 2 




1881 


3,855 


11,311 


22,646 


" 


. . 2 




1882 


3,936 


13,539 


25,895 


Decline 


. . 2 




1883 


4,010 


14,800 


28,377 


Depression . 


. . 3 




1884 


4,092 


17,923 


32,055 


" 


. . 3 




1885 


4,170 


21,729 


37,135 


" 


..4 




1886 


4,477 


27,166 


43,185 


Improvement 


..5 




1887 


4,404 


41,156 


67,530 


" 


..7 




1888 


4,569 


25,994 


45,036 


Prosperity . . 


..4 




1889 


4,689 


29,286 


49,859 


" 


..4 




1890 


4,817 


27,592 


47,782 


" 


. . 4 




1891 


4,985 


30,614 


52,086 


Decline 


..5 




1892 


5,140 


31,582 


54,576 


" 


..5 




1893 


5,236 


34,444 


57,561 


Depression . 


..5 




1894 


5,346 


38,853 


62,946 


" 


..6 




1895 


5,486 


35,327 


57,932 


" 


. . 6 




1896 


5,546 


32,147 


54,640 


Improvement 


..5 




1897 


5,614 


31,090 


52,211 


" 


..4 




1898 


5,620 


25,189 


44,492 


Prosperity . . 


. . 3 




1899 


5,604 


24,514 


44,185 


" 


. . 3 




1900 


5,650 


27,101 


48,602 


" 


. . 3 




1901 


5,753 


28,398 


49,879 


" 


..3 




1902 


5,821 


29,195 


51,627 


Decline 


. . 4 




1903 


5,900 


29,403 


51,521 


Depression . 


..5 




1904 


5,919 


30,193 


53,198 


Improvement 


. . 4 




1905 


5,931 


34,881 


57,722 


Prosperity . . 


..4 




1906 


5,923 


32,890 


56,543 


" 


. . 4 




1907 


5,989 


34,642 


59,346 


Decline 


. . 4 




1908 


6,006 


35,100 


59,792 


Depression . . 


. . 4 




1909 


5,991 


34,245 


62,461 


" 


..4 




1910 


6,033 


30,582 


57,689 


<< 


4 « 





366 BUSINESS BAROMETERS 

MISCELLANEOUS STATISTICS 

Among those miscellaneous statistics which are 
tabulated by some bankers and merchants may be 
mentioned the following : — 

Statistics on Losses and Wastes. 

Statistics on Changed Conditions. 

Absorption of Capital. 

Results of Invention. 

Economics due to Improved Methods. 

Statistics on Frauds and Lack of Credit. 

The Abuse of Credit. 

The Contraction of Circulating Mediums. 

Overproduction. 

Psychological Tendencies. 

Military Armament. 

Income Taxes. 

Excise and Internal Revenues. 

Associated Charity Reports. 

Velocity of Circulation. 

All of the above have some distant bearing either 
for diagnosing present conditions or for forecasting 
future conditions; but none are sufficient in them- 
selves, and when studying any one, due weight must 
be given to all of the others. The figures on any 
one of these subjects are of value only in their re- 
lation to the other figures which we have previously 
considered. As however none of these miscellaneous 
subjects are of sufficient importance to the merchant 
or investor for him to collect and tabulate figures, no 
immediate thought need be given to them. 



CHAPTER IX 

A TALK ON COPPERS 

(For later figures than given in this chapter, see the Addenda.) 

AS seen in preceding chapters, the laws of 
trade and finance necessitate a fluctuation 
in the price of all staple commodities. The 
tendency of the price of many commodities is up- 
ward. This is owing to several causes, among 
which may be mentioned the increased supply of 
gold, the increased price of labor and the in- 
creased consuming power of the people. There is 
a constant increase in demand which the increase 
in supply does not fully equal. When, however, 
this course of prices is represented graphically, it 
will be found that the lines are not straight, but 
"zig-zag." Although each low point may not be 
as low as the preceding low points and the general 
tendency may be upward, yet there is a continual 
fluctuation. A careful study will further show 
that these abrupt changes occur at intervals of 
every few years and are as certain to come, although 
with no set regularity. 

Many reasons to prove this latter statement 
may be offered, but we will confine ourselves to 
one. If any one commodity continued always to 
increase in price, without the fluctuation above 
mentioned, the tendency would be for every one 
to enter the business of manufacturing, selling or 
investing in that one commodity. 

Of course there is a great difference in the fluc- 
tuations of different commodities as some com- 



368 BUSINESS BAROMETERS 

modities fluctuate in price much more than others ; 
and it is more difficult to understand the laws 
affecting the fluctuation in the prices of some com- 
modities than of others. But it is possible to see 
the general trend of all prices taken as a group. 
As the country passes from periods of prosperity 
to periods of depression and vice versa, the general 
average price of commodities fluctuates as well as 
the average price of stocks. 

Therefore it is very important to the investor to 
anticipate changes in business conditions by ob- 
taining and studying the necessary statistics. 
Like the farmer, the investor must be first willing 
to purchase and plant the seed before expecting to 
reap a harvest. The majority of investors have 
not enough patience to spend money in obtaining 
data and wait for results which are not immediate. 
There are also a great many people who, although 
believing that prices must be lower in a year or so, 
have not sufficient self-control to wait a year be- 
fore investing a given amount of money. Money 
"burns in their pockets," and, as soon as they 
accumulate a certain amount, they seem deter- 
mined to invest it, even though they know that by 
depositing it in a bank and waiting they can pur- 
chase the same stocks for one-third of the price 
later on. The same class of people are also the 
ones who have not sufficient self-control and 
energy necessary to sell their securities in times of 
great prosperity. 

To those, however, who are willing to spend 
money in accumulating the necessary data and 



A TALK ON COPPERS 369 

who have the self-control to act in accordance with 
their better judgment, the opportunities to make 
money are unlimited. Such persons can, more- 
over, confine themselves to absolute and outright 
cash purchases and invest in only the most con- 
servative stocks, based on standard commodities. 
We cannot here study the application of the above 
theory to all classes of commodities and all classes 
of stocks. Therefore, as an illustration, only one 
application will here be considered; namely, that of 
purchasing and selling high grade standard divi- 
dend paying copper stocks in accordance with the 
market price of copper. 

Instead of endeavoring to explain the details of 
the system as used in purchasing steel stocks, 
cotton mill stocks, and other securities, the point 
of this chapter is to show how it works with one 
single commodity such as copper. There are two 
main requirements: — first, that one must keep in 
constant touch with business conditions; and 
secondly, that one must always keep informed of 
the best mines, realizing that the relative condi- 
tions of mines change from one year to another. 

It is impossible for a broker to give a rule such 
as that copper stocks should be sold when the 
price of metal is above 24 cents and bought when 
the price of metal is below 14 cents; for one year 
24 cents may be high and another year it may not 
be high. Moreover, the safest stocks to-day may 
not be those in which it was best to invest a few 
years ago. It therefore is necessary to obtain data 
on these points from some reliable agency operated 



370 BUSINESS BAROMETERS 

for the purpose. The press cannot be relied upon 
for this information, for reasons that can be readily 
understood. It is impossible for the press always 
to state the facts especially when the outlook is un- 
favorable. 

One can best obtain an idea as to whether the 
present price of copper is low or high from a study 
of fundamental statistics. Tables showing the 
high and low prices of the metal, over a long period 
of years, should, of course, also be studied; but these 
figures are not nearly so important as figures on 
"Clearings," "Failures," "Foreign Trade," etc., 
by which the movement in the price of metal may 
be forecasted. The price of the metal bears the same 
relation to the price of copper stocks as railroad earn- 
ings bear to the price of railroad stocks. After the 
price of the metal publicly changes, it is too late to 
trade in the stock. In order to successfully trade in 
the stock, one must, therefore, forecast changes in the 
price of the metal. This can be done only by a study 
of fundamental statistics relating to general business 
conditions. 

The next difficulty comes in selecting a list of 
mines in which to invest. The following table 
gives a list of fifteen copper companies and what we 
believe to be their maximum rate of dividend, based 
on copper at 24 cents a pound. The table shows 
also what the companies would theoretically earn 
with copper at 18 cents a pound and under. These 
figures are not exact, as they are based on the as- 
sumption that the cost per pound will be constant, 
whatever the output, when in reality the smaller 



A TALK ON COPPERS 371 

the output, the greater the cost per pound.* 
These figures therefore may be taken as maximum 
figures throughout. 

Maximum 

Div. Rate 18c 17c 16c 15c 14c. 

Cal. &Hec. ...$80 $78.00 $69.75 $61.50 $53.25 $45.00 

Osceola 14 22.60 19.95 17.30 14.65 12.00 

Wolverine 20 17.20 15.57 13.94 12.32 10.70 

Quincy 18 18.40 16.35 14.30 12.25 10.20 

Utah Con 6 15.80 14.10 12.40 10.70 9.00 

Amalgamated.. 8 13.41 11.92 10.43 8.94 7.45 

Anaconda 7 14.40 12.60 10.80 9.00 7.20 

Cal. &Ari 20 11.70 10.33 8.96 7.58 6.20 

Granby 12 11.80 10.27 8.73 7.19 5.65 

Cop. Range ... 8 9.05 7.98 6.92 5.86 4.80 

No. Butte 8 6.60 5.80 5.00 4.20 3.40 

Mohawk 10 7.80 6.65 5.49 4.33 3.17 

Shannon 2 4.57 3.99 3.40 2.81 2.22 

Utah Copper .. 3 4.38 3.92 3.46 3.09 2.54 

Tamarack 8 9.68 6.05 3.63 1.21 0.00 

Such tables are compiled by taking the present 
output of the mine and its net cost per pound f of 
the ore mined. The investor then deducts this cost 
per pound from the selling price given in the table, 
ascertains the profit per pound, multiplies the 
profit per pound by the output, and divides by the 
number of shares outstanding. 

There is another factor which enters; namely, 
that as the price declines, the production decreases. 
Therefore with a price of 14 cents probably only 
three-fifths as much copper is mined as at a price 

*This is not absolutely true as the price of labor generally decreases as 
the output decreases. 

fConsider the present cost, for instance, to Amalgamated as 9 cents; 
to Anaconda 10 cents; to Copper Range 9J cents; to Osceola 9£ cents. 



372 BUSINESS BAROMETERS 

of 24 cents, and therefore the figures on the above 
table should be correspondingly cut down. From 
the Babson System's cards the output of each mine 
can be obtained without difficulty, and one can at 
any time ascertain the relation of the actual output 
to the maximum output and reduce the figures in 
the preceding table accordingly. 

In a broad way, the high-cost producing mine 
suffers relatively the most by a decline in the metal 
market, although of course, in the matter of a loss 
in share earnings, the capitalization must also be 
taken into account. For instance, take two im- 
aginary cases. Company No. 1 and Company No. 2 
both have the same share par value. The former 
has 250,000 shares and makes its copper for 8 cents 
per pound. The latter has only 50,000 shares and 
makes its copper for 12 cents per pound. We will 
assume that copper falls from 18 cents to 13 cents 
and that the production is the same for both com- 
panies, namely 10,000,000 lbs. With the price of 
the metal at 13 cents instead of 18 cents, the profits 
of the first company would be cut in half, or from 
$4.00 per share to $2.00 while the profits per share 
of the second company would be only one-sixth 
what they would be at 18 cents and would drop 
from $12.00 to $2.00. If, however, the second 
company had the same capitalization as the first, 
namely 250,000 shares, then the drop would be 
from $2.40 per share with copper at 18 cents to 40 
cents per share with copper at 13 cents. A fluc- 
tuation of 1 cent in the price of copper means a 
difference of 40 cents per share in the profits of 



A TALK ON COPPERS 373 

No. 1 and a difference of $2.00 per share to 
No. 2. 

Figuring in this manner, a one-cent drop in 
copper shrinks the profits of Granby about $1.54 
per share, Copper Range about $1.06, and Amal- 
gamated approximately $1.50. Of course after 
reaching this point it is possible to go a step 
further by ascertaining the per cent, earned on the 
selling price, as well as the per cent, earned on the 
par value which is ascertained by the above 
method. 

Such reasoning results in the following rules for 
practical investing : 

1. Make a list of the standard dividend paying 
stocks of companies which issue complete reports. 

2. Star on this list the names of such companies 
as are doing a sufficient amount of development 
work, and which have ore blocked out for a long 
period of years. 

3. Select the stock from among those which are 
starred which, with copper at a low price, will show 
the greatest per cent, earned on the selling price of 
the stock. 

The result of such analysis clearly shows which 
is the best single stock to purchase. If there are 
four or five which figure approximately the same, 
it is best for an investor to divide his money among 
them all. 

It should be remembered that when ascertaining 
the cost of production, three factors must be con- 
sidered : — 

1 . The pounds of copper per ton of rock crushed. 



374 BUSINESS BAROMETERS 

2. The cost of supplies, labor, etc., including 
taxes and all fixed charges. 

3. The money spent on development, machin- 
ery, etc. 

The first factor is the most important for com- 
parison purposes, and tables following give a list of 
the leading mines with the average tons of rock 
stamped daily, the pounds of copper per ton of rock 
and the percentage of copper. 

The second factor is more or less constant with 
each mine; but the third factor is very different 
with different mines. This third factor is im- 
portant, but it is difficult to obtain satisfactory 
information excepting for the more conservative 
properties. 

After obtaining this data, the secret of successful 
investing depends simply upon purchasing these 
stocks when fundamental statistics show general 
business to be in a period of depression and keeping 
these stocks for a few years, until such time as 
such statistics show the country to be in a period of 
great prosperity when the stocks should be sold, 
although at this time probably the majority of in- 
vestors are just beginning to purchase stocks. 
When the stocks have been sold, the money should 
be deposited in some safe bank or invested on high 
grade short term bonds, until the price of the 
metal falls and the country experiences another 
period of depression . These same or other standard 
stocks are then again purchased, and in a few years 
the investor again sells at a huge profit. There is 
little risk in such a method if only the most conser- 



A TALK ON COPPERS 375 

vative stocks are bought, and there is no reason 
why any man cannot turn an original investment 
of about $5,000 into $200,000 within about twenty 
years, provided he is willing to spend a reasonable 
amount of time or money each year on collecting 
and tabulating fundamental statistics. 

The theory advanced in this chapter is based on the 
two assumptions that the mines will not become ex- 
hausted, and that no unforeseen event will make the 
working of these mines unprofitable. We refer to 
the physical arrangement of the mines, to the dis- 
covery of much richer and greater mines in other 
countries, and to the development of some other 
substance which will supersede copper in the in- 
dustrial world. 

Neither of these assumptions need be considered 
when investing in conservative railroad stocks, as 
railroads will always be of value both for their tangi- 
ble assets and for their earning capacity. There- 
fore, for an investment, the author personally 
believes that "railroads" are much preferable to 
1 'coppers." Still the latter are often very profitable 
for speculative purposes; and many, unlike the 
author, prefer such copper stocks to railroad stocks, 
owing to their freedom from the effects of undesir- 
able legislation and certain other unfavorable 
factors. 



376 BUSINESS BAROMETERS 



TABLES 

AVERAGE POUNDS OF COPPER PER TON UNDER 
AVERAGE NORMAL CONDITIONS. 

Tons rock Lbs. cop- <c cop- 

stpd. per in per in 

daily rock rock 

Calumet & Hecla 7,900 27.44 1.37 

Wolverine 1,070 25.00 1.25 

Ahmeek 1,100 22.7 1.14 

Copper Range 5,200 21.73 1.09 

Superior 300 20.52 1.03 

Tamarack 1,900 20.00 1.00 

Osceola 4,100 17.00 .85 

Allouez 700 16.00 .80 

IsleRoyale 1,100 14.20 .71 

Mohawk 2,200 13.70 .69 

Michigan 400 13.36 .67 

Centennial 550 13 . 10 .66 

Mass 380 12.40 .62 

Franklin 470 9.50 .47 

Victoria 300 9.00 .45 



A TALK ON COPPERS 



377 



TABLE OF PROFITS FOR TWELVE COPPER 
STOCKS 

This table shows how the profits are figured when copper 
is 13 cents per pound. The same method may be used when 
it is selling at any other price. 

Estimate of Aver. Profit Profit 

Shares average Lbs. cost per lb. per 

outstanding normal per of pro- on 13c share 
output share duct copper on 13c 
in lbs. per lb. copper 

Calumet & 
Hecla . . . 
Osceola . . . 
Wolverine . 
Quincy . . . 
Utah Con- 
solidated 
Amalga- 
mated . . 
Calumet & 
Arizona . 



Granby .... 
Copper 

Range . . 
North Butte 
Mohawk. . . 
Shannon. . . 



100,000 


80,000,000 800 


84 


H 


36.00 


96,150 


25,000,000 260 


9| 


H 


9.10 


60,000 


9,500,000 158 


n 


Sh 


9.00 


110,000 


22,500,000 204 


9 


4 


8.16 


300,000 


52,000,000 173 


8.8 


4.2 


7.27 



1,538,880 230,000,000 149 9 4 

200,000 28,000,000 140 9£ 3£ 
148,500 22,700,000 153 10 3 



5.96 

5.00 
4.60 



384,335 41,000,000 106 9 4 4.24 

410,000 33,000,000 80 9.8 3.2 2.56 

100,000 11,250,000 113 11.2 1.8 2.03 

300,000 18,000,000 60 10.2 2.8 1.68 



NOTE: — The above table may be carried further by dividing the "profits 
per share" by the "market price per share." 



378 



BUSINESS BAROMETERS 



TABLE SHOWING RANGE IN PRICE OF LAKE 
COPPER SINCE 1860 







Highest 






Lowest 




Year 


Av. 


Price 


Month 




Price 


Month 


1860 


22 


24.0 


(Jan) 


to 


19.7 


(Dec 

(July) 


1861 


22 


27.0 


(Dec) 


to 


17.5 


1862 


21 


32.8 


(Nov) 


to 


20.7 


(May) 


1863 


33 


38.7 


(Dec) 


to 


29.0 


(July) 


1864 


47 


55.0 


(July) 


to 


39.0 


(Jan) 


1865 


39 


50.5 


(Jan) 


to 


28.0 


(July) 


1866 


34 


42.0 


(Jan) 


to 


26.5 


(Nov) 


1867 


25 


29.2 


(Jan) 


to 


21.5 


(Dec) 


1868 


23 


24.5 


(Dec) 


to 


21.5 


(Jan) 


1869 


24 


27.0 


(Feb) 


to 


21.5 


(Dec) 


1870 


21 


23.3 


(Nov) 


to 


19.0 


(March) 


1871 


24 


27.0 


(Dec) 


to 


21.2 


(April) 


1872 


35 


44.0 


(Apr) 


to 


27.1 


(Jan) 


1873 


28 


35.0 


(Jan) 


to 


21.0 


(Nov) 


1874 


22 


25.0 


(Jan) 


to 


19.0 


(Aug) 


1875 


22 


23.8 


• (Sept) 


to 


21.5 


(Jan) 


1876 


21 


23.2 


(Jan) 


to 


18.7 


(Aug) 


1877 


19 


20.5 


(Feb) 


to 


17.5 


(Dec) 


1878 


16 


17.6 


(Jan) 


to 


15.5 


(Oct) 


1879 


18 


21.7 


(Nov) 


to 


15.5 


(Jan) 


1880 


21 


25.0 


(Jan) 


to 


17.8 


(June) 


1881 


18 


20.3 


(Dec) 


to 


16.0 


(July) 


1882 


19 


20.3 


(Jan) 


to 


17.8 


(April) 


1883 


16 


18.1 


(Jan) 


to 


14.8 


(Nov) 


1884 


13 


15.0 


(Dec) 


to 


11.0 


(Dec) 


1885 


10 


11.8 


(Feb) 


to 


9.8 


(May) 


1886 


11 


12.1 


(Dec) 


to 


10.0 


(May) 


1887 


13 


17.7 


(Dec) 


to 


9.9 


(May) 


1888 


16 


17.6 


(Nov) 


to 


15.8 


(Jan) 


1889 


13 


17.5 


(Jan) 


to 


11.0 


(Sept) 


1890 


15 


17.2 


(July) 


to 


14.0 


(March) 


1891 


12 


15.0 


(Jan) 


to 


10.2 


(Dec) 


1892 


11 


12.3 


(Dec) 


to 


10.5 


(Feb) 


1893 


10 


12.5 


(Jan) 


to 


9.6 


(Aug) 


1894 


9 


10.2 


(Jan) 


to 


9.0 


(June) 


1895 


10 


12.2 


(Aug) 


to 


9.3 


(April) 


1896 


10 


12.0 


(June) 


to 


9.7 


(Jan) 


1897 


11 


12.0 


(Jan) 


to 


10.7 


(Nov) 


1898 


12 


13.2 


(Dec) 


to 


11.0 


(Jan) 


1899 


17 


19.3 


(Apr) 


to 


13.2 


(Jan) 


1900 


16 


17.2 


(Apr) 


to 


16.0 


(Feb) 


1901 


16 


17.0 


(Jan) 


to 


13.0 


(Dec) 


1902 


12 


13.5 


(Feb) 


to 


11.0 


(Jan) 



A TALK ON COPPERS 379 



• 


Highest 


Lowest 




Year 


Av. Price Month 


Price 


Month 


1903 


13 15.3 (Mch) 


to 12.0 


(Dec) 


1904 


13 15.3 (Nov) 


to 12.2 


(Feb) 


1905 


15 18.8 (Dec) 


to 15.0 


(May) 


1906 


22 25.0 (Dec) 


to 17.8 


(Sept) 


1907 


20 26.2 (Mch) 


to 12.5 


(Oct) 


1908 


13 14.4 (Dec) 


to 12.7 


(May) 


1909 


13 14.3 (Jan) 


to 12.8 


(March) 


1910 


13 13.8 (Jan) 


to 12.5 


(July) 


1911 


12 14.3 (Dec) 


to 12.2 


(May) 


TABLE SHOWING RANGE IN 


PRICES OF LEADING 




COPPER STOCKS SINCE 1889 




The 


prices of the leading 


copper stocks since 


1889 have ranged as follows: 








1890 AVERAGE 56-87 





Osceola ranged from 45 (Sept.) to 32 (Dec.) ; 
Quincy 130 (Sept.) to 80 (Nov.). 

1891 AVERAGE 55-76 

Osceola ranged from 40 (June) to 26 (Nov.); 
Quincy 85 (Feb.) to 112 (Aug.). 

1892 AVERAGE 82-91 

Osceola ranged from 24 (Jan.) to 38 (Nov.); 
Quincy 140 (Dec.) to 145 (Dec). 

1893 AVERAGE 65-89 

Osceola ranged from 36 (Jan.) to 25 (Aug.); 
Quincy 143 (Jan.) to 105 (Aug.). 

1894 AVERAGE 50-76 

Osceola ranged from 28 (Apr.) to 19 (July) ; 
Quincy 125 (Jan.) to 81 (July). 

1895 AVERAGE 41-74 

Osceola ranged from 42 (July) to 20 (Dec.) ; 
Quincy 102 (Mch.) to 170 (July); Wolverine 10 
(July) to 3 (Dec). 

1896 AVERAGE 43-58 

Osceola ranged from 21 (July) to 32 (Nov.); 



380 BUSINESS BAROMETERS 

Quincy 134 (Feb.) to 104 (Aug.); Wolverine 6 
(Jan.) to 10 (Nov.). 

1897 AVERAGE 47-63 

Osceola ranged from 28 (Apr.) to 42 (Sept.) 
Quincy 129 (Jan.) to 104 (Mch.); Wolverine 9 
(Apr.) to 19 (Sept.). 

1898 AVERAGE 53-91 

Osceola ranged from 38 (Mch.) to 87 (Dec); 
Quincy 105 (Mch.) to 150 (Dec); Wolverine 18 
(Mch.) to 38 (Dec). 

1899 AVERAGE 51-87 

Mohawk ranged from 38 (Apr.) to 14 (Dec); 
Osceola 105 (Feb.) to 61 (Dec); Quincy 190 (Jan.) 
to 125 (Dec); Utah Cons. 53 (Apr.) to 21 (Dec); 
Wolverine 50 (Jan.) to 35 (Dec). 

1900 AVERAGE 57-78 
Amalgamated ranged from 83 (Jan.) to 100 

(Nov.) ; Mohawk 12 (June) to 28 (Dec) ; Osceola 
58 (June) to 80 (Nov.); Quincy 132 (July) to 178 
(Sept.) ; Utah Cons. 38 (Apr.) to 22 (June) ; Wol- 
verine 36 (June) to 49 (Dec). 

1901 AVERAGE 57-99 
Amalgamated ranged from 130 (June) to 61 

(Dec.) ; Mohawk 22 (Jan.) to 56 (Sept.) ; Osceola 
120 (Sept.) to 72 (Dec); Quincy 180 (Apr.) to 125 
(Dec.) ; Utah Cons. 38 (Nov.) to 19 (Dec) ; Wolver- 
ine 74 (Sept.) to 44 (Dec). 

1902 AVERAGE 47-74 
Amalgamated ranged from 79 (Feb.) to 53 (Nov.) ; 

Copper Range 44 (Mch.) to 65 (Oct.) ; Mohawk 27 
(Jan.) to 49 (Sept.) ; Osceola 90 (Feb.) to 48 (Nov.) ; 
Quincy 147 (Feb.) to 100 (Nov.); Utah Cons. 27 



A TALK ON COPPERS 381 

(Feb.) to 19 (July) ; Wolverine 42 (Jan.) to 65 
(Dec.). 

1903 AVERAGE 42-71 
Amalgamated ranged from 76 (Mch.) to 34 

(Oct.); Copper Range 75 (Feb.) to 37 (July); 
Granby 53 (Apr.) to 36 (July); Mohawk 58 
(Feb.) to 31 (July); Osceola 79 (Feb.) to 44 
(July); Quincy 127 (Feb.) to 80 (Oct.); Utah 
Cons. 22 (Jan.) to 34. (May); Wolverine 75 
(Mch.) to 54 (July). 

1904 AVERAGE 46-81 
Amalgamated ranged from 43 (Feb.) to 83 

(Dec); Copper Range 38 (Feb.) to 75 (Nov.); 
Granby 25 (Mch.) to 58 (Nov.); Mohawk 34 
(Feb.) to 58 (Nov.) ; Osceola 53 (Feb.) to 98 (Nov.) ; 
Quincy 80 (Feb.) to 125 (Nov.); Utah Cons. 30 
(Jan.) to 47 (Nov.); Wolverine 68 (Jan.) to 110 
(Nov.). 

1905 AVERAGE 64-98 
Amalgamated ranged from 70 (Jan.) to 112 

(Dec); Copper Range 64 (Jan.) to 85 (Dec); 
Granby 50 (Jan.) to 105 (Dec); North Butte 
34 (Aug.) to 93 (Dec.) ; Mohawk 48 (May) to 65 
(Dec); Osceola 88 (Feb.) to 115 (Oct.); Quincy 
95 (May) to 118 (Jan.); Utah Cons. 39 (Mch.) 
to 59 (Nov.) ; Wolverine 105 (Jan.) to 135 (Dec). 

1906 AVERAGE 73-127 
Amalgamated ranged from 118 (Feb.) to 92 

(July) ; Copper Range 87 (Jan.) to 67 (July) ; 
Granby 80 (July) to 152 (Oct.); North Butte 75 
(Mch.) to 118 (Oct.); Calumet & Arizona 107 to 
185; Mohawk 55 (Mch.) to 85 (Dec); Osceola 93 



382 BUSINESS BAROMETERS 

(Mch.) to 151 (Dec); Quincy 114 (Jan.) to 80 
(July); Utah Cons. 70 (Jan.) to 52 (June); Wol- 
verine 131 (Jan.) to 190 (Dec.). 

1907 AVERAGE 56-140 
Amalgamated ranged from 122 (Jan.) to 42 

(Oct.) ; Copper Range 105 (Jan.) to 44 (Oct.) ; 
Granby 152 (Feb.) to 60 (Oct.); North Butte 
120 (Jan.) to 30 (Oct.) ; Calumet & Arizona 198 
(Feb.) to 89 (Oct.); Mohawk 96 (Jan.) to 37 
(Oct.); Osceola 181 (Feb.) to 71 (Oct.); Quincy 
148 (Feb.) to 70 (Oct.) ; Utah Cons. 79 (Jan.) 
to 25 (Oct.); Wolverine 198 (Jan.) to 93 (Oct.). 

1908 AVERAGE 66-101 
Amalgamated ranged from 88 (Nov.) to 45 

(Feb.); Copper Range 84 (Nov.) to 55 (Feb.) ; 
Granby 110 (July) to 80 (Jan.); North Butte 90 
(Nov.) to 41 (Feb.) ; Calumet & Arizona 130 (Aug.) 
to 93 (Feb.); Mohawk 73 (Nov.) to 45 (Feb.); 
Osceola 135 (Dec.) to 77 (Feb.); Quincy 100 
(Aug.) to 77 (Feb) ; Utah Cons. 50 (Aug.) to 29 
(Jan.); Wolverine 155 (Nov.) to 115 (Jan.). 

1909 AVERAGE 80-104 
Amalgamated ranged from 96 (Nov.) to 65 

(Feb.); Copper Range 87 (Nov.) to 68 (Feb.); 
Granby 110 (Jan.) to 90 (Feb.); North Butte 85 
(Jan.) to 47 (Dec); Calumet & Arizona 119 (Jan.) 
to 96 (May); Mohawk 70 (Jan.) to 57 (July); 
Osceola 170 (Dec.) to 122 (Feb.); Quincy 99 
(Jan.) to 83 (Dec); Utah Cons. 50 (Nov.) to 37 
(Feb.); Wolverine 158 (Aug.) to 139 (Mch.). 



A TALK ON COPPERS 383 

1910 AVERAGE 53-97 
Amalgamated ranged from 90 (Jan.) to 55 (July) ; 

Copper Range 85 (Jan.) to 58 (Feb.); Granby 111 
(Jan.) to 20 (July); North Butte 50 (Jan.) to 18 
(June) ; Calumet & Arizona 103 (Jan.) to 45 (July) ; 
Mohawk 75 (Jan.) to 43 (July); Osceola 166 (Jan.) 
to 114 (July); Quincy 92 (Mar.) to 66 (July); Utah 
Cons. 46 (Jan.) to 12 (Dec.) ; Wolverine 150 (Jan.) 
to 102 (July). 

1911 AVERAGE 44-68 
Amalgamated ranged from 72 (June) to 45 

(Sept.); Copper Range 70 (Feb.) to 47 (Sept.); 
Granby 44 (June) to 26 (Aug.); No. Butte 36 
(June) to 20 (Sept.) ; Calumet & Arizona 64 
(Dec.) to 45 (Sept.) ; Mohawk 57 (Dec.) to 36 
(Apr.) ; Osceola 124 (Jan.) to 81 (Sept.) ; Quincy 
76 (Dec.) to 55 (Sept.) ; Utah Cons. 20 (June) to 
10 (Jan.); Wolverine 122 (Feb.) to 74 (Nov.). 



THE 
NEW YORK BANK STATEMENT 

The new form of statement is more or less con- 
fusing. This is so not only because the exhibits of 
the trust company members form part of the 
returns, but also because the Clearing-House 
managers undertake to show the actual condition 
of the institutions at the end of the week as well 
as the averages for the week. Up to the time of 
the panic of 1907 it was the custom to give merely 
the averages. As far as the separate banks are 
concerned, these averages are still the only thing 
reported. But after the panic the Clearing House 
began to make up the general totals so as to show 
the actual results at the end of the week as well as 
the week's averages. At the same time the State 
Superintendent of Banks began to make public 
general totals for all the State Institutions and 
to report separately the results for the State banks 
and trust companies outside the Clearing House. 
By combining these latter results (which are on 
the basis of averages for the week and do not show 
the condition at the end of the week) with the 
figures of averages in the Clearing-House statement, 
one is enabled to get a set of totals covering sub- 
stantially the entire banking institutions of the 
Greater New York. 

It would simplify things very much if the 
Clearing-House could be induced to discard alto- 
gether the system of averages and confine itself to 
showing the actual condition at the end of the week, 



NOTES 385 

and if the State Banking Department could be 
prevailed upon to substitute the actual figures for 
the averages in the case of the institutions under 
its care. We would then have a true statement 
of the banking situation for each Saturday morning. 
But under present conditions it is not possible to 
have such a statement, and the only thing to do is 
to use the figures really available. The statement 
as it now appears shows the returns of the banks 
by themselves, also the returns of the trust com- 
panies by themselves, and then gives totals 
embracing both banks and trust companies. The 
papers also print the figures given out by the State 
Banking Department, and then furnish a further 
table in which the different items in the two sets 
of statements are brought together and an aggre- 
gate made up for the two combined. This latter 
then affords the basis for another little statement 
in which are given the combined results for all the 
banks and trust companies in Greater New York 
for the latest week and compare them with the 
corresponding totals arrived at in the same way 
for preceding weeks. The items of course are 
limited, but comprise the loans, the deposits and 
the money holdings of the combined institutions 
and would hence appear to furnish what our cor- 
respondent wants, namely an indication of "the 
drift of things." We reproduce this table here, 
from Sept. 2 to Dec. 9, 1911. 



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NOTES ' 387 

The foregoing shows a marked diminution in 
money holdings, the total having been reduced 
from $518,600,400 Sept. 2 to $465,033,300 Dec. 9, 
in considerable part as the result of shipments of 
gold to Canada and South America and some 
transfers of gold to San Francisco. The changes 
in loans are smaller than might be expected. They 
stand now at $2,480,178,000, against $2,547,141,800 
Sept. 2. The loss in deposits is less than the 
combined reduction in loans and in money holdings. 
In other words, deposits are now $2,310,182,600, 
against $2,420,404,700 on Sept. 2. 



FINAL WORD TO READERS 

It occurs to the author that this book may 
possibly be the means of causing some persons who 
will not give the proper study to statistics and 
general conditions, to invest in stocks. I therefore 
advise every reader that, if he is unwilling to invest 
about one hundred dollars a year in collecting and 
tabulating the necessary statistical data, it is better 
to buy no stocks whatsoever, but to confine all 
investments strictly to high grade bonds such as 
are recommended by conservative bond dealers. 

One other thing, — whether buying stocks or 
bonds, the investor should not be in a hurry to make 
money too fast. The principal invested should 
grow slowly and naturally. One should be willing 
to creep before walking and be willing to walk 
before running, remembering that there are many 
years in which to accomplish the desired object 
and that success depends very largely upon pro- . 
gressing slowly and carefully, especially during the 
first few years. 



" No sir, ye can bet it ain't th' people that have no money 
that causes panics. Panics are th' result iv too manny people 
havin' money. Th' top iv good times is hard times an' th' 
bottom iv hard times is good times. Whin I see wan man with 
a shovel on his shouldher dodgin' eight thousand autymobills I 
begin to think 'tis time to put me money in me boot. 

" Don't git excited about it, Hinnessy, me boy. Cher up. 
'Twill be all right tomorrow, or th' next day, or sometime. 
'Tiswan good thing about this here wurruld, that nawthan' 
lasts long enough to hurt. I have been through manny a panic. 
I cud handle wan as well as Morgan. Panics cause thimsilves 
an' take care of thimsilves ." 

Dooley. 



GENERAL INDEX 



Action equals reaction, 99. 

Annual events, of 1860, 120 
of 1861, 121; of 1862, 122 
of 1863, 122; of 1864, 123 
of 1865, 124; of 1866, 125 
of 1867, 126; of 1868, 126 
of 1869, 127; of 1870, 128 
of 1871, 129; of 1872, 130 
of 1873, 131; of 1874, 134 
of 1875, 134; of 1876, 135 
of 1877, 137; of 1878, 138 
of 1879, 139; of 1880, 140 
of 1881, 141; of 1882, 142 
of 1883, 144; of 1884, 145 
of 1885, 146; of 1886, 147 
of 1887, 149; of 1888, 149 
of 1889, 150; of 1890, 151 
of 1891, 152; of 1892, 153 
of 1893, 154; of 1894, 155 
of 1895, 157; of 1896, 158 
of 1897, 159; of 1898, 160 
of 1899, 161; of 1900, 163 
of 1901, 164; of 1902, 165 
of 1903, 167; of 1904, 168 
of 1905, 169; of 1906, 170 
of 1907, 171: of 1908, 173 
of 1909, 174; of 1910, 175 
of 1911, 177. 

Babson's Business Barom- 
eters, 396. 

Balance of trade, 276; gen- 
eral rules concerning, 278. 

Banks; cash in, 237; Comp- 
troller's Reports, 226; de- 
posits of, 242 ; economic 
laws concerning, 229, 237; 
functions of, 95; invest- 
ments of, 228, 229; loans 
of, 226; notes of, 228; re- 
sources of, 229; statement 
of New York banks, 242, 
2 50, 3 1 7 , 3 84 ; table of loans 
and resources, opp. 226. 

Bank clearings, 191; as a 
barometer, 19, 107, 193; 
of New York, 199; general 
rules concerning, 199; table 
of. 195. 



Baring failure, 152. 

"Black Friday" panic, 127. 

Bonds; possibility of profits 
from, 55; tables of panic 
prices in 1884, 57; in 1893, 
58; in 1903, 59; in 1907, 
6 1 ; tables showing effect of 
reorganizations on prices, 
of 1st class, 65, of 2nd 
class, 66, of 3rd class, 66, of 
4th class, 67, of miscel- 
laneous, 68. 

Building statistics, as a ba- 
rometer, 184, 188; general 
rules concerning, 190, 191. 

Business failures, 200; as a 
barometer of business con- 
ditions, 20, 107, 200, 203; 
tables of, 201, 202, 204; 
general rules concerning, 
209. 

Capital, 182. 

Cash of banks, 237; historic 
survey of, 239; ratio to de- 
posits, 230; table of, 238; 
general rules concerning, 
241. 

Certificates of Clearing 
Houses, 256; table of, 257. 

Clearing Houses, functions 
of, 191; certificates of, 256; 
in New York, 192; table of 
certificates issued, 257. 

Commodity prices, 307; as a 
barometer, 2 1 , 108 ; in crises 
307; chart of since 1860, 
opp. 76; affected by gold 
production, 299; indexes 
of, 313; interest of to bank- 
ers, 93; problem in, 79; 
rules concerning, 316; 
tables of since 1860, 81; 
tendencies affecting, 311. 

Comparative statistics, val- 
ue of, 13, 25. 

Composite chart, 99, 398; 
method of plotting, 111, 



INDEX 



391 



111 (foot note); subjects 
involved in, 109. 

Comptroller's reports, 226. 

Copper, 367; table of maxi- 
mum dividends of fifteen 
companies, 371; table of 
daily average production 
of leading mines, 376; 
table of profits per share 
of leading stocks, 377; 
range in price of Lake Cop- 
per since 1860, 378; range 
in price of leading stocks 
since 1889, 379. 

Crops, 327; as a barometer, 
22, 109; government board 
on, 335; government re- 
ports on, 327; nature of 
monthly reports on, 332; 
general rules concerning, 
342. 

Cycles, controlling law of, 
99; foretold by fundamental I 
statistics, 17; rules con- 
cerning, 102, 180; length of, 
98; periods of, 15,24,98. 

Deposits of banks, 242 ; gen- 
eral rules concerning, 249. 

Exports of merchandise, 272; ! 
benefit from increase in 
exports of manufactured 
goods, 273; general rules j 
concerning, 275. 

Failures in business, 2C0; 
as a barometer, 20, 107, 
200, 203; tables of, 201, 
202, 204; general rules 
concerning, 209. 

Fire losses, as a barometer, 
186. 

Foreign exchange, 292. 

Foreign money rates, 292; 
general rules concerning, 
298. 

Foreign trade, 263; as a 
barometer, 21, 108; bal- 
ance of, 276; exports, 272; 



imports, 263; table of, 264; 
volume of, 276. 

Fundamental statistics, 15, 
17; list of twenty-five sub- 
jects under, 18, 107; three 
general heads under, 109; 
composite chart of, 98; me- 
chanical work of collecting, 
106; methods of handling, 
110, 111 (foot note), 113; 
need of studying many 
subjects in connection with, 
100; theory of, 25; value to 
merchants, 77. 

General heads under fun- 
damental statistics, twelve, 
18, 107; three, 109; ar- 
rangement of the twelve 
under the three, 110. 

Gold, movements of, 279; 
as a barometer, 21, 108, 
production of, 299; relation 
of production to prices, 
299; general rules concern- 
ing, 306. 

Idle car figures, 349; general 
rules concerning, 351. 

Immigration, 210; as a ba- 
rometer of labor condi- 
tions, 20, 107, 212; general 
rules concerning, 215. 

Imports of merchandise, 263; 
dangers accompanying in- 
crease in, 264-269; general 
rules concerning, 271; table 
of, 264. 

Industrial cycles, foretold by 
fundamental statistics, 17; 
the law maintaining in the 
past, 16; controlling law of, 
99; length of, 98; periods 
in, 15, 24, 98; rules of 
periods in 102, 180. 

Investment conditions, sub- 
jects related to; crops, 327; 
foreign money rates, 292; 
idle car figures, 349; new 
securities, 324; political 



392 



INDEX 



factors, 352; railroad earn- 
ings, 343 ; social conditions, 
358; stock exchange trans- 
actions, 321. 

Investments of the banks, 
228. 

Labor conditions, indexed by 
immigration figures as a 
barometer, 20, 107; lack 
of satisfactory figures on, 
210,212. 

Loans of banks, 226; historic 
survey of, 230; relation to 
resources, 229; general rules 
concerning, 236; table of, 
opp. 226. 

Mercantile conditions, sub- 
jects related to; bank 
clearings, 191; business 
failures, 200; immigration 
210; new building, 184. _ 

Miscellaneous statistics, list 
of headings for, 366. 

Monetary conditions, sub- 
jects related to; balance of 
trade, 276; cash of banks, 
237; Comptroller's report, 
226; deposits of banks, 
242; exports, 272; gold 
movements, 279; loans of 
banks, 226; money, 218; 
surplus reserves, 250, 251, 
253; volume of trade, 276. 

Money, 218; as a barometer, 
20, 104, 107, 117; chart of, 
during four great panics, 
opp. 236 ; gross and net sup- 
ply of, 220, 221; effect on 
merchants of the supply, 
223; prices and the sup- 
ply of, 250; general rules 
concerning, 225; foreign 
rates of, 292. 

New railroad construction, 
as a barometer, 19, 107, 
187; in the panic of 1837, 
188; in the panic of 1857, 



188; general rules concern- 
ing 190. _ 

j New securities listed, eco- 
nomic laws affecting, 324; 
general rules concerning, 
326. 

! Panics; of 1837, 188; of 
1857, opp. 118, 188; of 
1865, 124; of 1869, 127; 
of 1873, 131; opp. 118, 
189, 249; of 1884, 145, 
259; of 1890, 151, 
260; of 1893, opp. 118, 
154, 261; of 1903, 167, 
205; of 1907, opp. 118, 
171, 204, 296; of "Black 
Friday," 127; oP'Undigest- 
ed Securities," 167 ; a cause, 
258; chart of money course 
during four panics, opp. 
236; chart of stock market 
during four panics, opp. 
258; derived from un- 
bridled prosperity, 115, 
361; foretold by "loans 
to resources," 230; move- 
ments of, 138; relation of 
"money in circulation" to, 
222, 224; tables of bond 
prices, in 1884, 57; in 1893, 
58; in 1903,59; in 1907,61; 
table of four major panics 
with accompanying events, 
opp. 118. 
Periods of a cycle, 15, 24, 
98; rules of, 102, 180; fore- 
told by fundamental sta- 
tistics,'^. 

! Political factors, 352; as a 
barometer 24, 109; list of, 
353; general rules concern- 
ing, 357. 
Quotations on the stock ex- 
change, 318; affected by 
"transactions," 321; gen- 
eral rules concerning, 323. 
Railroad earnings, 343; as a 
barometer, 23, 109; as af- 



INDEX 



393 



fected in three depres- 
sions, 34:5; general rules 
concerning, 3-18. 

Real estate as a barometer, 
182, 186. m 

Reorganizations, 65; tables 
of bond and stock prices 
as affected by, 65-70. 

Resources of banks, 229; re- 
lation to loans, 229; table, 
of, opp. 226. 

Social conditions, 358; as a 
barometer, 109; general 
rules concerning, 363. 

Stock exchange, quotations, 
318; list of ten conserva- 
tive stocks, 319; the 
"Wall St. Journal's" list 
of thirty two stocks, 319; 
list of ten bonds, 320; 
transactions, 321; new se- 
curities, 324. 

Stock prices, as a barometer, 
22, 108; chart of prices 
since 1874, 47; possibili- 



ties of profits from stocks, 
47; problems in profits, 
47, 50, 54; quotations, 318; 
table with annual high 
and low prices of leading 
stocks since 1860, 32; 
table of prices of ten stocks 
in 1907 and 1910, 31; table 
showing effect of reorgani- 
zation on prices, 65, 68. 
j Subjects treated under funda- 
mental statistics, twenty 
five, 18, 107. 

Surplus reserves, 238, 250, 
254; general rules con- 
cerning, 255. 

Transactions on the stock 
exchange, 321; general 
rules concerning, 323. 

"Undigested Securities" 
panic, 167. 

Volume of trade, 276. 

Wealth, as a barometer, 182, 
table of, 183. 




DfeOFTII 



BABSON'S DESK SHEET OF TABLES 

Barometer Figures for Business Conditions 






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IMPORTANT ADDENDA 



NOTICE 

In order to avoid the necessity of continually 
revising this entire book and yet give its readers 
the latest important figures obtainable, one of the 
desk sheets of Tables (such as we send weekly to 
subscribers) is always inserted here when the book 
is mailed. 

Readers, however, should remember that this 
sheet is only a small part of the work which we 
supply to our subscribers, and, moreover, this sheet 
is completely revised for them each week. 

The "later quotations, prices and other figures," 
referred to in chapters II, III and IX, will not 
>ear in these Addenda until next year. 






BABSON'S REPORTS 



"Fundamental Conditions" 

A Special Service to furnish Merchants and Investors up-to- 
date figures on the subjects mentioned in this book 

(To avoid any misunderstanding we must first state that this work did 
not originate with us, but was inaugurated years ago by some of the most 
prosperous banking and mercantile firms of America. The expense in- 
curred by each firm, when performing the work independently, was so great, 
however, that the smaller banks, investors and merchants hesitated to 
assume independently the responsibility. Therefore we took up the 
work in the mutual interests of all concerned, dividing the expense among 
the different individuals who became subscribers and shared the resulting 
benefits.) 

Regular Service 

General Tables and Charts 

Our work consists in collecting with great care, 
system and impartiality all facts and figures which 
can in any way aid in forecasting future mercantile, 
monetary and investment conditions. All figures 
are arranged, analyzed and tabulated, the more 
important figures relative to each subject being 
selected and forwarded weekly to the subscribers 
on desk sheets (like the annexed) which are kept 
under a plate glass which we furnish without 
charge. In addition to the Tables, the more impor- 
tant subjects are also graphically shown in chart 
form. In all, these Tables cover about twenty- 
five subjects, such as Failures, Railroad Earnings, 
Crops, Bank Clearings, Gold Movements, Balance 
of Trade, etc. In short, our work is the same as 
that of regular clerks who might be in the employ 
of our subscribers and whose duty it might be to 
gather these statistics. 



IMPORTANT ADDENDA 397 

Merchants and investors having these tables at 
their offices can at any time refer thereto, and note 
whether or not the figures indicate a change in 
business conditions; and if so, to what extent. In 
other words, each week we send a complete sheet 
of new Tables, revised up to date, giving the figures 
on each subject by months for several years back, 
as well as the latest figures. The large sheet in 
these Addenda is a partial sample of what this week- 
ly sheet contains. Sending all the back figures each 
week as well as the new, makes it unnecessary for 
subscribers to do any posting, filing or other office 
work connected therewith. 

These large sheets show subscribers whether the 
figures on a certain subject are increasing or de- 
creasing, and by study one is able to form an 
estimate for the complete current year. This esti- 
mate may then be compared with final annual 
figures for preceding years, which are also furnished 
in the service. In many cases these annual figures 
are given for as many as fifty years, so that by 
intelligently comparing this estimate for the current 
year, with the figures for preceding years, one may 
readily discover what the figures on any one subject 
indicate. 

For instance, if a banker or a merchant at any 
time refers to figures on any one of these subjects, 
such as "Bank Clearings," he has only to turn to 
his Tables marked "Bank Clearings." There he 
will find the latest figures procurable this week, 
monthly figures for the past ten years, and also 
the annual figures for the past ten years, with a 



398 BUSINESS BAROMETERS 

most interesting Chart complete with suggested 
interpretations. 

Weekly Barometer Letter and 
Composite Plot 

For the special benefit of merchants and in- 
vestors who have not the time personally to study 
figures, we supplement these Tables by Weekly 
Letters which contain the results of our own study 
reduced to Barometer Figures. By comparing the 
Barometer Figure for present conditions with 
previous Barometer Figures, one may readily see 
in what period we are, and forecast the nature of 
the next change in mercantile, monetary and in- 
vestment markets. 

Moreover, by referring to our Composite Plot, 
which is made up from the Summary Barometer 
Figures (see sample inserted in Chapter IV), one 
may readily see how much of the present period 
has been consumed and intelligently forecast about 
when a change may be expected and whether it 
will be for the better or the worse. These Barom- 
eter Figures and the Composite Plot are based on 
the very latest bank clearings, railroad earnings, 
foreign trade, labor conditions, etc., and always 
show the exact present business conditions of the 
United States as well as the course of stock and 
bond prices. By comparing the figures for a 
series of weeks, subscribers immediately notice the 
tendency of mercantile, monetary and stock market 
conditions. 



IMPORTANT ADDENDA 399 

Investors and merchants receiving this 
Weekly Letter and Composite Plot are there- 
fore kept in close touch with the actual con- 
ditions in the United States, and are able 
at any time to forecast: 

1. Mercantile Conditions of the United States 
as relating to manufacturing and commerce, en- 
abling manufacturers and merchants to use the 
flexible credit system. 

2. Monetary Conditions of the United States 
as relating to the conditions of the money market, 
rates of interest and the supply of funds. 

3. Investment Conditions of the United States; 
that is, the general course of the stock and bond 
markets, disregarding minor movements and ma- 
nipulative influence. 

Conclusion and Total Cost 

The cost of this entire service (either the "Regu- 
lar Service" or one of the three options later 
described is only $7.50 per month, with the first 
year payable in advance. This price entitles the 
subscriber to the following: — 

{A special plate glass desk cover for the sheet of 
Tables and a leather covered binder for the Charts, 
etc., are furnished to the subscriber as an original 
installation.) 

(a) The General Tables on the Desk Sheet con- 
taining original figures on each of the twenty-five 



400 BUSINESS BAROMETERS 

subjects, both by years and months. These tables 
are always up to date, a new sheet of tables being 
sent every week. 

(b) The Weekly Letters containing the Barometer 
Figures, the Composite Plot and our conclusions 
and suggestions together with Special Letters and 
other matter which may be of current interest. 

(c) Charts and Diagrams illustrating the work, 
which subscribers keep in the above-mentioned 
binder. 

SPECIAL NOTICE 

In addition to the Regular Service above de- 
scribed, the following three options have been 
prepared : 

(1) Option for Manufacturers and Merchants 

In addition to giving the important data as to 
general business and credit conditions throughout 
the country as a whole, the mercantile trade is 
kept constantly informed as to conditions in each 
section of the Lmited States. Thus every two 
weeks we prepare and send to each subscriber, who 
requests this Mercantile Option, a map of the 
United States about 16 x 10 inches showing the 
following interesting features: 

(a) By shaded areas such sections of the country 
where loans abnormally exceed deposits and where 
merchants are liable to have trouble to borrow 
from their local banks as much money as heretofore. 

(b) By red circles such cities whose ' 'clearings" 



IMPORTANT ADDENDA 401 

are now recording a decrease compared with the 
same period last year, thus showing the sales de- 
partment exactly where general trade has fallen off 
and where it has not. 

(c) By red crosses the localities where failures 
are reported to be abnormally large or increasing, 
thus showing the credit department where to 
watch for trouble. 

(d) By special markings such sections of the 
country where — owing to drouth, blights, frosts, 
or other special causes — our correspondents re- 
port that less business may be expected during 
the coming season; and conversely such sections 
where — owing to special causes — a much larger 
business may be expected in the immediate future. 

Subscribers to this option receive each week the 
Barometer Letter and Composite Plot of Business 
Conditions, and each month the Desk Sheet of Tables 
together with such other Charts and material, be- 
longing to the Regular Service described above, 
that manufacturers and merchants deem desirable. 

(2) Option for Bankers 

In addition to treating the fundamental con- 
ditions affecting credits and money rates in general, 
we also are prepared to aid banks in selecting "out- 
of-town" commercial paper. Instead, however, of 
giving detailed reports such as may be obtained 
from leading mercantile agencies, we treat almost 
exclusively of the character of the different firms 
and how they are considered by leading commercial 
banks, although of course we pass none whose 



402 BUSINESS BAROMETERS 

statements are not satisfactory. We, however, 
confine our reports exclusively to names whose 
notes are being offered by commercial paper firms. 

In addition to giving opinions as to any paper 
on the market, we also, when requested, send each 
week a list of commercial paper that we believe 
to be absolutely good and which is being offered 
at the time being. This feature, of itself, is well 
worth the price of the entire work, as it keeps a 
bank constantly informed as to the composite 
opinion of the leading city banks as to the best of 
the commercial paper being offered at any given 
time. 

For a given week, however, we recommend only 
one or two notes from each commercial paper firm's 
list of offerings, because we wish to do something 
for every commercial paper firm in order to avoid 
the least semblance of favoritism to any one firm; 
and to recommend each week more than one or two 
notes from each, would make these weekly lists 
altogether too large to be useful to subscribers. 

Subscribers to this option also receive each week 
the Barometer Letter and Composite Plot of Business 
Conditions, and each month the Desk Sheet of Tables 
together with such other Charts and material of the 
Regular Service as each bank from experience finds 
it requires. 

(3) Option for Investors 

Because of the tremendous demand of invest- 
ors for concrete information as to special securities, 
we are now sending, when requested, special letters 



IMPORTANT ADDENDA 403 

bearing directly on the purchase of securities and 
of use in the selecting of safe, conservative, divi- 
dend-paying stocks and bonds. There is no extra 
charge for this "Investment" feature and it will be 
supplied if one will simply ask for the "Investment 
Option." 

This consists of the Barometer Letter each week, 
the large Desk Sheet once a month, and the Special 
Letters, Charts and other matter which we issue 
from time to time, and in addition, twice a month, 
a special list of short term notes, bonds, and other 
securities, which our organization has studied and 
believes to be safe and conservative investments. 
In other words, this Investment Option has every- 
thing that the Regular Service has, and much 
besides, except that the large Desk Sheet is sent 
once a month instead of once a week. 



Applications to become subscribers to this work, 
and receive the benefits outlined in this book, 
should be mailed to 

BABSON'S STATISTICAL ORGANIZATION 

INCORPORATED 

Wellesley Hills Station, Boston, Mass. 



SUCCESS COMES 

not by forecasting, but rather by doing the right 
thing at the right time and always being willing to 
change one's course. For this reason much more 
money is made by directing one's business and in- 
vestments with a purpose of preventing panics than 
by trying to forecast panics and then pursuing a 
policy based upon the belief that said forecast must 
prove true. With this object in view, I offer the 
services of my large organization that merchants, 
bankers and investors may always be best pre- 
pared for whatever the future is most likely to 
bring forth. 

Roger W. Babson. 



ADVERTISEMENTS 



FUNDAMENTAL STATISTICS 

KNOWN AS 

BABSON'S REPORTS 

RELATIVE TO THE UNDERLYING 

Monetary and Mercantile and 
Investment Conditions 

We are collecting, analyzing and distributing 
statistics on the 25 subjects mentioned in this 
book and are prepared to supply the results to 
Stock Exchange Firms, Bond Houses, Mercantile 
Houses, Manufacturers and Investors. 

By a study of the data which we supply, one 
can readily ascertain for himself whether we are in 
a Period of Prosperity, a Period of Depression, or 
are passing from one to the other; and what will 
be the next major change in trade, money rates 
and investment prices. 

The cost of this service is very small in com- 
parison with what it is costing firms to collect such 
data independently, and we believe that our fig- 
ures are more accurate and more up to date than 
if collected by subscribers independently. Further 
particulars relative to this work will be sent gratis 
on application. Address 

BABSON'S STATISTICAL ORGANIZATION 

(Incorporated) 

WELLESLEY HILLS, MASSACHUSETTS 



ESPECIAL ATTENTION 

IS CALLED TO OUR 

Instruction Courses 

ON 

Investments and Collateral 

FOR INVESTORS 

AND 

EMPLOYEES OF BOND HOUSES AND 
STOCK EXCHANGE FIRMS 



A booklet describing this work in detail will be mailed gratis 
upon request 



Address EDUCATIONAL DEPARTMENT of 

Babson's Statistical Organization 

(Incorporated) 

WELLESLEY HILLS, MASSACHUSETTS 




I 



NVESTORS, have you access to all the 
information on, and the time to keep 
abreast of, those issues which interest you? 



^ The remoteness of this possibility has set 
a whole corps of men at work in an immense 
financial library. They spend all their hours 
corraling facts and shaping them into concise, 
usable form. 

C| Their product is an Investors' Card Service cover- 
ing thoroughly forty railroads, industrial, and utility 
stocks of greatest interest. This work is furnished in 
a desk cabinet and kept revised to the hour. 

CJ With this work your investments may be made and followed 
unbridled by obligation. 

Why not write for a specimen of the work taken from this service — an issue 
you are particularly interested in — if only to keep pace with the latest success in 
financial literature for investors ? 

OFFICIAL INFORMATION SERVICE 

(Incorporated) 
24 STONE STREET, NEW YORK 

WILLIS D. PORTER, President 



H153 81 i 



***** 












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N. MANCHESTER, 
«^^ INDIANA 46962 



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